Company Quick10K Filing
⚲
Orbital Atk
Financials
Price114.44 EPS1
Shares86 P/E185
MCap9,838 P/FCF127
Net Debt-51 EBIT82
TEV9,787 TEV/EBIT119
TTM 2019-05-25, in MM, except price, ratios
Filings
10-Q 2020-11-28 Filed 2021-01-07
10-K 2020-08-29 Filed 2020-10-28
10-Q 2020-05-30 Filed 2020-07-09
10-Q 2020-02-29 Filed 2020-04-06
10-Q 2019-11-30 Filed 2020-01-09
10-K 2019-08-31 Filed 2019-10-30
10-Q 2019-05-25 Filed 2019-07-02
10-Q 2019-02-23 Filed 2019-04-04
10-Q 2018-11-24 Filed 2019-01-03
10-K 2018-08-25 Filed 2018-10-24
10-Q 2018-05-26 Filed 2018-07-10
10-Q 2018-02-24 Filed 2018-04-10
10-Q 2017-11-25 Filed 2018-01-09
10-K 2017-08-26 Filed 2017-11-09
10-Q 2017-05-27 Filed 2017-07-14
Reports
8-K 2021-01-21
8-K 2021-01-06
8-K 2020-10-26
8-K 2020-09-24
8-K 2020-07-08
8-K 2020-06-15
8-K 2020-05-27
8-K 2020-04-06
8-K 2020-01-22
8-K 2020-01-09
8-K 2019-11-07
8-K 2019-10-29
8-K 2019-10-16
8-K 2019-10-09
8-K 2019-10-08
8-K 2019-10-07
8-K 2019-09-30
8-K 2019-08-21
8-K 2019-07-23
8-K 2019-07-02
8-K 2019-06-13
8-K 2019-04-04
8-K 2019-02-25
8-K 2019-01-23
8-K 2019-01-03
8-K 2018-12-17
8-K 2018-11-14
8-K 2018-11-13
8-K 2018-11-05
8-K 2018-10-24
8-K 2018-10-04
8-K 2018-07-27
8-K 2018-07-10
8-K 2018-04-10
8-K 2018-03-20
8-K 2018-02-06
8-K 2018-02-05
8-K 2018-01-09

ATK 10Q Quarterly Report

Content
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
Exhibits
EX-31.1 exhibit311-q121.htm
EX-31.2 exhibit312-q121.htm
EX-32.1 exhibit321-q121.htm

Orbital Atk Earnings 2020-11-28

Balance SheetIncome StatementCash Flow
1.20.90.70.40.2-0.12017201820192020
Assets, Equity
 0.20.20.10.10.00.02017201820192020
Rev, G Profit, Net Income
 0.30.20.1-0.1-0.2-0.32017201820192020
Ops, Inv, Fin
atk-20201128
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________________
FORM 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
OR
oTRANSITION 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)
atk-20201128_g1.jpg
___________________________________________________________________________________________________________
Delaware82-1038121
(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 classTrading symbolName of each exchange on which registered
Common Stock, par value $0.01 per shareSMPLNasdaq
 

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, there were 95,720,637 shares of common stock, par value $0.01 per share, issued and outstanding.


THE SIMPLY GOOD FOODS COMPANY AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED NOVEMBER 28, 2020



INDEX
Page
Item 5.
Other Information
Item 6.
Exhibits

2

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 data)

November 28, 2020August 29, 2020
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
Other long-term liabilities
21,884 22,765 
Total liabilities
758,726 775,474 
See commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $0.01 par value, 100,000,000 shares authorized, none issued
— — 
Common stock, $0.01 par value, 600,000,000 shares authorized, 95,818,871 and 95,751,845 shares issued at November 28, 2020 and August 29, 2020, respectively958 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
1,095,573 1,094,507
Retained earnings
163,030 140,530 
Accumulated other comprehensive loss
(924)(879)
Total stockholders’ equity
1,256,492 1,232,971
Total liabilities and stockholders’ equity$2,015,218 $2,008,445 

See accompanying notes to the unaudited condensed consolidated financial statements.
3
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, 2020November 30, 2019
Net sales$231,152 $152,153 
Cost of goods sold137,111 89,947 
Gross profit94,041 62,206 
Operating expenses:
Selling and marketing25,195 18,434 
General and administrative25,415 18,145 
Depreciation and amortization4,244 2,453 
Business transaction costs— 26,159 
Total operating expenses54,854 65,191 
Income (loss) from operations39,187 (2,985)
Other income (expense):
Interest income3 1,379 
Interest expense(8,372)(4,969)
Gain on foreign currency transactions9 16 
Other income47 37 
Total other expense(8,313)(3,537)
Income (loss) before income taxes30,874 (6,522)
Income tax expense (benefit)8,374 (1,729)
Net income (loss)$22,500 $(4,793)
Other comprehensive income (loss):
Foreign currency translation adjustments(45)— 
Comprehensive income (loss)$22,455 $(4,793)
Earnings (loss) per share from net income (loss):
Basic$0.24 $(0.05)
Diluted$0.23 $(0.05)
Weighted average shares outstanding:
Basic95,538,111 89,708,633 
Diluted99,763,119 89,708,633 

See accompanying notes to the unaudited condensed consolidated financial statements.
4
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, 2020November 30, 2019
Operating activities
Net income (loss)
$22,500 $(4,793)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization4,513 2,525 
Amortization of deferred financing costs and debt discount1,077 455 
Stock compensation expense1,110 1,673 
Unrealized loss (gain) on foreign currency transactions9 (16)
Deferred income taxes4,400 (1,853)
Amortization of operating lease right-of-use asset1,182 626 
Loss on operating lease right-of-use asset impairment354 — 
Other402 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 assets2,874 (1,416)
Accounts payable8,216 (6,533)
Accrued interest(240)1,536 
Accrued expenses and other current liabilities(5,127)8,556 
Other assets and liabilities1,227 (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— (1,250)
Acquisition of business, net of cash acquired— (984,201)
Proceeds from sale of business5,800 — 
Investments in intangible assets(114)— 
Net cash provided by (used in) investing activities
5,593 (985,731)
Financing activities
Proceeds from option exercises157208
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— 352,542 
Equity issuance costs— (3,323)
Proceeds from issuance of long-term debt— 460,000 
Deferred financing costs— (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 period95,847 266,341 
Cash and cash equivalents at end of period
$91,476 $72,711 

5
Table of Contents
Thirteen Weeks Ended
November 28, 2020November 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 $— 
Operating lease right-of-use assets recognized at ASU No 2016-02 transition$— $5,102 
Finance lease right-of-use assets recognized at ASU No 2016-02 transition$— $1,211 
Operating lease right-of-use assets recognized after ASU No 2016-02 transition$306 $— 

See accompanying notes to the unaudited condensed consolidated financial statements.
6
Table of Contents
The Simply Good Foods Company and Subsidiaries
Condensed Consolidated Statements of Stockholders' Equity
(Unaudited, dollars in thousands, except share data)

Common StockTreasury StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossTotal
SharesAmountSharesAmount
Balance at August 29, 202095,751,845 $958 98,234 $(2,145)$1,094,507 $140,530 $(879)$1,232,971 
Net income— — — — — 22,500 — 22,500 
Stock-based compensation— — — — 1,110 — — 1,110 
Foreign currency translation adjustments— — — — — — (45)(45)
Shares issued upon vesting of restricted stock units53,908 — — — (201)— — (201)
Exercise of options to purchase common stock13,118 — — — 157 — — 157 
Balance at November 28, 202095,818,871 $958 98,234 $(2,145)$1,095,573 $163,030 $(924)$1,256,492 

Common StockTreasury StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossTotal
SharesAmountSharesAmount
Balance at August 31, 201981,973,284 $820 98,234 $(2,145)$733,775 $105,830 $(836)$837,444 
Net loss— — — — — (4,793)— (4,793)
Stock-based compensation— — — — 1,673 — — 1,673 
Public equity offering13,379,205 134 — — 349,085 — — 349,219 
Shares issued upon vesting of restricted stock units46,911 — — — (70)— — (70)
Exercise of options to purchase common stock17,372 — — — 208 — — 208 
Balance at November 30, 201995,416,772 $954 98,234 $(2,145)$1,084,671 $101,037 $(836)$1,183,681 
See accompanying notes to the unaudited condensed consolidated financial statements.

7
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 is a consumer-packaged food and beverage company that aims to lead the nutritious snacking movement with trusted brands that offer a variety of convenient, innovative, great-tasting, better-for-you snacks and meal replacements. The Company’s nutritious snacking platform consists of the following core brands that specialize in providing products for consumers that follow certain nutritional philosophies, dietary approaches and/or health-and-wellness trends: Atkins® for those following a low-carb lifestyle; and Quest® for consumers seeking to partner with a brand that makes the foods they crave work for them, not against them, through a variety of protein-rich foods and beverages that also limit sugars and simple carbs. The Company distributes its products in major retail channels, primarily in North America, including grocery, club and mass merchandise, as well as through e-commerce, convenience, specialty and other channels. The Company's portfolio of nutritious snacking brands gives it a strong platform with which to introduce new products, expand distribution, and attract new consumers to its products. The Company's platform also positions it to continue to selectively pursue acquisition opportunities of brands in the nutritious snacking category.

Unaudited Interim Condensed Consolidated Financial Statements

    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 our opinion, necessary for a fair presentation of the results of operations, financial position and cash flows for the indicated periods. All such adjustments were of a normal and recurring nature unless otherwise disclosed. The year-end balance sheet data was derived from the audited financial statements and, in accordance with the instructions to Form 10-Q, certain information and footnote disclosures required by GAAP have been condensed or omitted. The results reported in these unaudited interim condensed consolidated financial statements are not necessarily indicative of the results that may be reported for the entire fiscal year and should be read in conjunction with our consolidated financial statements for the fiscal year ended August 29, 2020, included in our Annual Report on Form 10-K (“Annual Report”), filed with the SEC on October 28, 2020.

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

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2. Summary of Significant Accounting Policies

    Refer to Note 3, Summary of Significant Accounting Policies, to the consolidated financial statements included in the Company's Annual Report for a description of significant accounting policies.

Recently Issued and Adopted Accounting Pronouncements

Recently Issued Accounting Pronouncements Not Yet Adopted

    In December 2019, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which amends 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 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 contracts and the effects of adoption of this ASU through December 31, 2022. The Company does not anticipate the amendments in this ASU to be material to its consolidated financial statements.

    In October 2020, the FASB issued ASU No. 2020-10, Codification Improvements, which provides updates for technical corrections, clarifications to guidance, simplifications to wording or structure of guidance, and other minor improvements across various areas of accounting within 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.

Recently Adopted Accounting Pronouncements

    In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326), which modified the measurement of expected credit losses of certain financial instruments. The Company adopted this ASU as of the first day of fiscal 2021. As a result 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. The adoption of this ASU did not have a material effect on the consolidated financial statements or the related disclosures.

3. 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
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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.

    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, net25,359 
Inventories44,032 
Prepaid assets1,214 
Other current assets3,812 
Property and equipment, net(1)
9,843 
Intangible assets, net(2)
868,375 
Other long-term assets20,997 
Liabilities assumed:
Accounts payable25,200 
Other current liabilities11,237 
Deferred income taxes(3)
10,754 
Other long-term liabilities18,891 
Total identifiable net assets912,295 
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 5 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.
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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, 2020November 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.

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 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$15,648 

4. Revenue Recognition

    Revenues from transactions with external customers for each of the Company’s products would be impracticable to disclose and management does not view its business by product line. The following is a summary of revenue disaggregated by geographic area and brand:
Thirteen Weeks Ended
(In thousands)November 28, 2020November 30, 2019
North America
Atkins$122,761 $127,812 
Quest95,769 17,082 
Total North America218,530 144,894 
International12,622 7,259 
Total net sales$231,152 $152,153 

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

5. Goodwill and Intangibles

    Changes to Goodwill during 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 adjustment1,178 
Sale of business(2,818)
Balance as of November 28, 2020$543,134 

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    The change in Goodwill attributed to the acquisition of a business during the thirteen weeks ended November 28, 2020 was the result of measurement period adjustments made to finalize the acquisition method of accounting for the Acquisition of Quest as described in Note 3. 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 no 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.

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

    Intangible assets, net in the Consolidated Balance Sheets consist of the following:
November 28, 2020
(In thousands)Useful lifeGross carrying amountAccumulated amortizationNet carrying amount
Intangible assets with indefinite life:
Brands and trademarks
Indefinite life$974,000 $— $974,000 
Intangible assets with finite lives:
Customer relationships
15 years174,000 21,403 152,597 
Proprietary recipes and formulas
7 years7,000 3,381 3,619 
Licensing agreements
14 years22,000 5,313 16,687 
Software and website development costs
3-5 years5,302 2,365 2,937 
Intangible assets in progress
3-5 years55 — 55 
$1,182,357 $32,462 $1,149,895 
August 29, 2020
(In thousands)Useful lifeGross carrying amountAccumulated amortizationNet carrying amount
Intangible assets with indefinite life:
Brands and trademarks
Indefinite life$979,000 $— $979,000 
Intangible assets with finite lives:
Customer relationships
15 years174,000 18,503 155,497 
Proprietary recipes and formulas
7 years7,000 3,131 3,869 
Licensing agreements
14 years22,000 4,920 17,080 
Software and website development costs
3-5 years$5,967 $2,645 $3,322 
$1,187,967 $29,199 $1,158,768 

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

    Estimated future amortization for each of the next five fiscal years and thereafter is as follows:
(In thousands)Amortization
Remainder of 2021$11,530 
202215,224 
202314,938 
202414,257 
202513,171 
2026 and thereafter106,720 
Total$175,840 

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6. Long-Term Debt and Line of Credit

    On July 7, 2017, the Company entered into a credit agreement with Barclays Bank PLC and other parties (as amended to date, the “Credit Agreement”). The Credit Agreement provides for (i) a term facility of $200.0 million (“Term Facility”) with a seven year maturity and (ii) a revolving credit facility of up to $75.0 million (the “Revolving Credit Facility”) with a five year maturity. Substantially concurrent with the consummation of the Acquisition of Atkins, the full $200.0 million of the Term Facility (the “Term Loan”) was drawn. The interest rate per annum is based on either (i) a base rate equaling the higher of (a) the “prime rate”, (b) the federal funds effective rate plus 0.50% and (c) the Euro-currency rate applicable for an interest period of one month plus 1.00% plus (x) 3.00% margin for 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. As security for the payment or performance of its debt, the Company has pledged certain equity interests in its subsidiaries.

    On March 16, 2018 (the “Amendment Date”), the Company entered into an amendment (the “Repricing Amendment”) to the Credit Agreement. As a result of the Repricing Amendment, the interest rate on the Term Loan was reduced and, as of the Amendment Date, such loans had an interest rate equal to, at the Company's option, either LIBOR plus an applicable margin of 3.50% or a base rate plus an applicable margin of 2.50%. The Repricing Amendment did not change the interest rate on the Revolving Credit Facility. The Revolving Credit Facility continued to bear interest based upon the Company's consolidated net leverage ratio as of the last financial statements delivered to the administrative agent. No additional debt was incurred, or any proceeds received, by the Company in connection with the Repricing Amendment. The incremental fees paid to the administrative agent are reflected as additional debt discount and are amortized over the terms of the long-term financing agreements using the effective-interest method.

    On November 7, 2019, the Company entered into an amendment (the “Incremental Facility Amendment”) to the Credit Agreement to increase the principal borrowed on the Term Facility by $460.0 million. The Term Facility together with the incremental borrowing make up the Initial Term Loans (as defined in the Incremental Facility Amendment) and as of the Amendment No. 2 Effective Date (as defined in the Incremental Facility Amendment), the Initial Term Loans bear interest at a rate equal to, at the Company's option, either LIBOR plus an applicable margin of 3.75% or a base rate plus an applicable margin of 2.75%. The Incremental Facility Amendment was executed to partially finance the Acquisition of Quest. No amounts under the Term Facility were repaid as a result of the execution of the Incremental Facility Amendment.

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

    Long-term debt consists of the following:
(In thousands)November 28, 2020August 29, 2020
Term Facility (effective rate of 4.8% at November 28, 2020)
$581,500$606,500
Finance lease liabilities (effective rate of 5.6% at November 28, 2020)
892922
Less: Deferred financing fees
9,194 10,272 
Total debt
573,198597,150
Less: Current finance lease liabilities
275271
Long-term debt, net of deferred financing fees
$572,923$596,879

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

    As of November 28, 2020, the Company had letters of credit in the amount of $4.4 million outstanding. These letters of credit offset against the availability of the Revolving Credit Facility and exist to support three of the Company's leased buildings and insurance programs relating to workers' compensation. No amounts were drawn against these letters of credit at November 28, 2020.

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

7. Fair Value of Financial Instruments

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

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

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

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

    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.

8. Income Taxes

    The tax expense and the effective tax rate resulting from operations were as follows:
Thirteen Weeks Ended
(In thousands)November 28, 2020November 30, 2019
Income (loss) before income taxes$30,874 $(6,522)
Provision (benefit) for income taxes$8,374 $(1,729)
Effective tax rate27.1 %26.5 %

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

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9. Leases

    The components of lease expense were as follows:
Thirteen Weeks Ended
(In thousands)Statement of Operations CaptionNovember 28, 2020November 30, 2019
Operating lease cost:
Lease costCost of goods sold and General and administrative$1,498 $806 
Variable lease cost (1)
Cost of goods sold and General and administrative398 310 
Operating lease cost1,896 1,116 
Short term lease costGeneral and administrative— 6 
Finance lease cost:
Amortization of right-of-use assetsCost of goods sold68 70 
Interest on lease liabilitiesInterest expense13 16 
Total finance lease cost81 86 
Total lease cost$1,977 $1,208 
(1) Variable lease cost primarily consists of common area maintenance, such as cleaning and repairs.

    In conjunction with the Company's restructuring activities as discussed in Note 15, the Company incurred a $0.4 million impairment charge related to its operating lease right-of-use asset for its lease in Toronto, Ontario during the thirteen weeks ended November 28, 2020. Costs for these restructuring activities have been included within General and administrative on the Consolidated Statements of Operations and Comprehensive Income. Refer to Note 15, Restructuring and Related Charges, for additional information regarding restructuring activities.

    The gross amounts of assets and liabilities related to both operating and finance leases are as follows:
(In thousands)Balance Sheet CaptionNovember 28, 2020August 29, 2020
Assets
Operating lease right- of-use assetsOther long-term assets$24,532 $25,703 
Finance lease right-of-use assetsProperty and equipment, net844 912 
Total lease assets$25,376 $26,615 
Liabilities
Current:
Operating lease liabilitiesAccrued expenses and other current liabilities$4,355 $4,329 
Finance lease liabilitiesCurrent maturities of long-term debt275 271 
Long-term:
Operating lease liabilitiesOther long-term liabilities21,882 22,764 
Finance lease liabilitiesLong-term debt, less current maturities617 651 
Total lease liabilities$27,129 $28,015 
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    Future maturities of lease liabilities as of November 28, 2020 were as follows:
(In thousands)Operating LeasesFinance Leases
Fiscal year ending:
Remainder of 2021$4,166 $235 
20224,722 313 
20234,187 278 
20244,289 145 
20253,837 — 
Thereafter11,050 — 
Total lease payments32,251 971 
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.

    The weighted-average remaining lease term and weighted-average discount rate for operating and finance leases were as follows:
November 28, 2020August 29, 2020
Weighted-average remaining lease term (in years)
Operating leases6.786.97
Finance leases3.173.41
Weighted-average discount rate
Operating leases5.7 %5.7 %
Finance leases5.6 %5.6 %

    Supplemental and other information related to leases was as follows:
Thirteen Weeks Ended
(In thousands)November 28, 2020November 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases$1,811 $1,170 
Operating cash flows from finance leases7 11 
Financing cash flows from finance leases$78 $78 


10. Commitments and Contingencies

Litigation

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

    During the 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 and August 29, 2020, the Company had $1.3 million reserved for potential settlements.

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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, the Company will be required to make payments of $2.9 million over the next year.

11. 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.

Equity Warrants

    Prior to the Acquisition of Atkins, Conyers Park issued 6,700,000 private placement warrants. The Company assumed these private placement warrants in connection with the Acquisition of Atkins. As a result of the Acquisition of Atkins, the warrants issued by Conyers Park were no longer exercisable for shares of Conyers Park common stock, but were instead exercisable for common stock of the Company. All other features of the warrants were unchanged. As of November 28, 2020, the private placement warrants to purchase 6,700,000 shares of the Company’s common stock remain outstanding.

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 and November 30, 2019, the Company did not repurchase any shares of common stock. As of November 28, 2020, approximately $47.9 million remained available under the stock repurchase program.

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12. Earnings Per Share

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

    The following table reconciles the numerators and denominators used in the computations of both basic and diluted earnings (loss) per share:
  Thirteen Weeks Ended
(In thousands, except per share data)November 28, 2020November 30, 2019
Basic earnings (loss) per share computation: 
Numerator: 
Net income (loss) $22,500 $(4,793)
Denominator: 
Weighted average common shares - basic 95,538,111 89,708,633 
Basic earnings (loss) per share from net income (loss)$0.24 $(0.05)
Diluted earnings (loss) per share computation:
Numerator:
Net income (loss)$22,500 $(4,793)
Denominator:
Weighted average common shares outstanding - basic95,538,111 89,708,633 
Public and Private Warrants3,216,252 — 
Employee stock options899,375 — 
Non-vested shares109,381 — 
Weighted average common shares - diluted99,763,119 89,708,633 
Diluted earnings (loss) per share from net income (loss)$0.23 $(0.05)

    Earnings (loss) per share calculations for the thirteen weeks ended November 28, 2020 and November 30, 2019 excluded