UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from ______________ to ______________
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
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(Address of principal executive offices) |
(Zip Code) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data 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).
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 |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging Growth Company |
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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 November 4, 2024 the registrant had
Table of Contents
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ii |
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PART I. |
1 |
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Item 1. |
Financial Statements (Unaudited) |
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1 |
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2 |
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3 |
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4 |
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6 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
7 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
22 |
Item 3. |
35 |
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Item 4. |
35 |
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PART II. |
36 |
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Item 1. |
36 |
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Item 1A. |
36 |
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Item 2. |
66 |
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Item 3. |
66 |
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Item 4. |
66 |
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Item 5. |
66 |
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Item 6. |
67 |
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68 |
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i
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (the “Quarterly Report”) contains “forward-looking statements” (within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended) about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will” or “would” or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:
ii
You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report. A summary of selected risks associated with our business is set forth at the beginning of the section titled “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report. And while we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.
The forward-looking statements made in this Quarterly Report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report to reflect events or circumstances after the date of this Quarterly Report or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.
iii
PART I – FINANCIAL INFORMATION
VITAL FARMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share amounts)
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September 29, |
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December 31, |
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(Unaudited) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Investment securities, available-for-sale |
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Accounts receivable, net of allowance for credit losses of $ |
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Inventories |
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Prepaid expenses and other current assets, net of allowance for credit losses of $ |
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Income taxes receivable |
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Total current assets |
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Property, plant and equipment, net |
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Operating lease right-of-use assets |
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Goodwill and other assets |
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Total assets |
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$ |
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$ |
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Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued liabilities |
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Operating lease liabilities, current |
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Finance lease liabilities, current |
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Income taxes payable |
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Total current liabilities |
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Operating lease liabilities, non-current |
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Finance lease liabilities, non-current |
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Other liabilities |
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Total liabilities |
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$ |
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$ |
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Stockholders’ equity: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive loss |
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( |
) |
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( |
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Total stockholders’ equity |
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$ |
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$ |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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See accompanying notes to the unaudited condensed consolidated financial statements.
1
VITAL FARMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share and per share data)
(Unaudited)
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13-Weeks Ended |
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39-Weeks Ended |
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September 29, |
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September 24, |
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September 29, |
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September 24, |
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Net revenue |
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$ |
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$ |
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$ |
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$ |
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Cost of goods sold |
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Gross profit |
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Operating expenses: |
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Selling, general and administrative |
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Shipping and distribution |
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Total operating expenses |
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Income from operations |
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Other income (expense), net: |
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Interest expense |
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( |
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( |
) |
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( |
) |
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( |
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Interest income |
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Other expense, net |
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( |
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( |
) |
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( |
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( |
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Total other income (expense), net |
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( |
) |
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( |
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Net income before income taxes |
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Income tax provision |
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Net income |
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Net income per share: |
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Basic: |
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$ |
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$ |
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$ |
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$ |
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Diluted: |
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$ |
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$ |
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$ |
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$ |
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Weighted average common shares outstanding: |
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Basic: |
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Diluted: |
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See accompanying notes to the unaudited condensed consolidated financial statements.
2
VITAL FARMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in thousands)
(Unaudited)
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13-Weeks Ended |
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39-Weeks Ended |
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September 29, |
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September 24, |
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September 29, |
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September 24, |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Other comprehensive income, before tax: |
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Available-for-sale debt securities: |
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Unrealized net holding gain |
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Amounts reclassified for realized gains (losses) to earnings |
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( |
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Available-for-sale debt securities, before tax |
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Other comprehensive income, before tax |
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Income tax expense related to items of other comprehensive income |
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( |
) |
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( |
) |
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( |
) |
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( |
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Other comprehensive income, net of tax |
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Comprehensive income |
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$ |
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$ |
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$ |
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$ |
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See accompanying notes to the unaudited condensed consolidated financial statements.
3
VITAL FARMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Amounts in thousands, except share amounts)
(Unaudited)
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Common Stock |
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Shares |
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Amount |
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Additional |
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Retained |
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Accumulated |
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Total |
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Balances as of December 31, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Exercise of stock options |
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— |
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— |
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— |
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Vesting of restricted stock units |
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— |
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— |
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— |
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— |
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— |
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Shares withheld for tax liability on vested restricted stock units |
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( |
) |
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— |
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( |
) |
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— |
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— |
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( |
) |
Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Other comprehensive income, net |
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— |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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— |
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Balances as of March 31, 2024 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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Exercise of stock options |
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— |
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— |
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— |
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Vesting of restricted stock units |
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— |
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— |
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— |
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— |
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— |
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Shares withheld for tax liability on vested restricted stock units |
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( |
) |
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— |
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( |
) |
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— |
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— |
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( |
) |
Shares issued under employee stock purchase plan |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Other comprehensive income, net |
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— |
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— |
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— |
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— |
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||
Net income |
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— |
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— |
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— |
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— |
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||
Balances as of June 30, 2024 |
|
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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Exercise of stock options |
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— |
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— |
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— |
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|||
Vesting of restricted stock units |
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— |
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— |
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— |
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— |
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— |
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Shares withheld for tax liability on vested restricted stock units |
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( |
) |
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— |
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( |
) |
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— |
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— |
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( |
) |
Stock-based compensation expense |
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— |
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— |
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— |
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— |
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||
Other comprehensive income, net |
|
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— |
|
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— |
|
|
|
— |
|
|
|
— |
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||
Net income |
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— |
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— |
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— |
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— |
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||
Balances as of September 29, 2024 |
|
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|
$ |
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$ |
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|
$ |
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|
$ |
( |
) |
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$ |
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|||||
See accompanying notes to the unaudited condensed consolidated financial statements.
4
VITAL FARMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Amounts in thousands, except share amounts)
(Unaudited)
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Common |
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Shares |
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Amount |
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Additional |
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Retained |
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Accumulated |
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Total |
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||||||
Balances as of December 25, 2022 |
|
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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|||||
Vesting of restricted stock units |
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— |
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— |
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|
|
— |
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|
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— |
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|
|
— |
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Shares withheld for tax liability on vested restricted stock units |
|
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( |
) |
|
|
— |
|
|
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— |
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|
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— |
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|
|
— |
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— |
|
Stock-based compensation expense |
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— |
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— |
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|
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|
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— |
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— |
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||
Other comprehensive income, net |
|
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— |
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|
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— |
|
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|
— |
|
|
|
— |
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||
Net income |
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— |
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— |
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— |
|
|
|
|
|
|
— |
|
|
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|
||
Balances as of March 26, 2023 |
|
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|
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$ |
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$ |
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$ |
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|
$ |
( |
) |
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$ |
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|||||
Exercise of stock options |
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|
|
— |
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|
|
|
|
|
— |
|
|
|
— |
|
|
$ |
|
|||
Vesting of restricted stock units |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Shares withheld for tax liability on vested restricted stock units |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Shares issued under employee stock purchase plan |
|
|
|
|
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— |
|
|
|
|
|
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— |
|
|
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— |
|
|
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|||
Stock-based compensation expense |
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— |
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— |
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|
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— |
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— |
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||
Other comprehensive income, net |
|
|
— |
|
|
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— |
|
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|
— |
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— |
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||
Net income |
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— |
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— |
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— |
|
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— |
|
|
|
|
||
Balances as of June 25, 2023 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
Exercise of stock options |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Vesting of restricted stock units |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
Shares withheld for tax liability on vested restricted stock units |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
( |
) |
||
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Other comprehensive income, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Balances as of September 24, 2023 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
See accompanying notes to the unaudited condensed consolidated financial statements.
5
VITAL FARMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
|
|
39-Weeks Ended |
|
|||||
|
|
September 29, |
|
|
September 24, |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
||
Net income |
|
$ |
|
|
$ |
|
||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
||
Depreciation |
|
|
|
|
|
|
||
Reduction in the carrying amount of right-of-use assets |
|
|
|
|
|
|
||
Amortization of available-for-sale debt securities |
|
|
|
|
|
|
||
Amortization of debt issuance costs |
|
|
|
|
|
|
||
Stock-based compensation expense |
|
|
|
|
|
|
||
Deferred taxes |
|
|
( |
) |
|
|
|
|
Unrealized loss on derivative instruments |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Net change in operating assets and liabilities |
|
|
( |
) |
|
|
( |
) |
Net cash provided by operating activities |
|
$ |
|
|
$ |
|
||
Cash flows from investing activities: |
|
|
|
|
|
|
||
Purchases of property, plant and equipment |
|
|
( |
) |
|
|
( |
) |
Purchases of available-for-sale debt securities |
|
|
|
|
|
( |
) |
|
Purchases and settlements of derivative instruments |
|
|
( |
) |
|
|
( |
) |
Sales of available-for-sale debt securities |
|
|
|
|
|
|
||
Maturities and call redemptions of available-for-sale debt securities |
|
|
|
|
|
|
||
Proceeds from the sale of property, plant and equipment |
|
|
|
|
|
|
||
Return of investment in variable interest entity |
|
|
|
|
|
|
||
Net cash provided by investing activities |
|
$ |
|
|
$ |
|
||
Cash flows from financing activities: |
|
|
|
|
|
|
||
Proceeds from borrowing under revolving line of credit |
|
|
|
|
|
|
||
Proceeds from exercise of stock options |
|
|
|
|
|
|
||
Proceeds from issuance of common stock under employee stock purchase plan |
|
|
|
|
|
|
||
Repayment of revolving line of credit |
|
|
|
|
|
( |
) |
|
Payment of tax withholding obligation on vested restricted stock unit shares |
|
|
( |
) |
|
|
( |
) |
Principal payments under finance lease obligations |
|
|
( |
) |
|
|
( |
) |
Payment of financing costs |
|
|
( |
) |
|
|
|
|
Net cash provided by (used in) financing activities |
|
$ |
|
|
$ |
( |
) |
|
Net increase in cash and cash equivalents |
|
|
|
|
|
|
||
Cash and cash equivalents at beginning of the period |
|
|
|
|
|
|
||
Cash and cash equivalents at end of the period |
|
$ |
|
|
$ |
|
||
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
||
Cash paid for interest |
|
$ |
|
|
$ |
|
||
Cash paid for income taxes |
|
$ |
|
|
$ |
|
||
Supplemental disclosure of non-cash investing and financing activities: |
|
|
|
|
|
|
||
Purchases of property, plant and equipment included in accounts payable and accrued liabilities |
|
$ |
|
|
$ |
|
||
See accompanying notes to the unaudited condensed consolidated financial statements.
6
VITAL FARMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
Note 1. Nature of the Business and Basis of Presentation
Vital Farms, Inc. (the “Company”) was incorporated in Delaware on
The accompanying unaudited condensed consolidated financial statements as of September 29, 2024 and for the 13-week and 39-week periods ended September 29, 2024 and September 24, 2023 have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP” or “GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “Annual Report”).
In the opinion of management, the included disclosures are adequate, and the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary for a fair statement of the Company’s consolidated financial position as of September 29, 2024, consolidated results of operations for the 13-week and 39-week periods ended September 29, 2024 and September 24, 2023, and consolidated cash flows for the 39-week periods ended September 29, 2024 and September 24, 2023. Such adjustments are of a normal and recurring nature and certain reclassifications of previously reported amounts have been made to conform to the current year presentation. The condensed consolidated balance sheet as of December 31, 2023 was derived from audited annual financial statements but does not contain all of the footnote disclosures from the audited annual financial statements. The condensed consolidated results of operations for the 13-week and 39-week periods ended September 29, 2024 are not necessarily indicative of the consolidated results of operations that may be expected for the fiscal year ending December 29, 2024.
Fiscal Year: The Company’s fiscal year ends on the last Sunday in December and contains either 52 or 53 weeks. In a 52-week fiscal year, each of the Company’s fiscal quarters consist of 13 weeks. The additional week in a 53-week fiscal year is added to the fourth quarter, making such quarter consist of 14 weeks. Therefore, the financial results of certain 53-week fiscal years, and the associated 14-week quarters, will not be exactly comparable to the prior and subsequent 52-week fiscal years and the associated 13-week quarters. The fiscal quarters ended September 29, 2024 and September 24, 2023 both contain operating results for 13 weeks. The fiscal year ended December 31, 2023 consisted of 53 weeks.
Note 2. Summary of Significant Accounting Policies
The significant accounting policies and estimates used in preparation of the unaudited condensed consolidated financial statements are described in the Company’s audited consolidated financial statements as of and for the fiscal year ended December 31, 2023, and the notes thereto, which are included in the Annual Report. Other than the adoption of the new accounting pronouncements and standards as further described below, there have been no material changes to the Company’s significant accounting policies during the 39-week period ended September 29, 2024.
Recently Adopted Accounting Pronouncements
The new accounting pronouncements recently adopted by the Company are described in the Company’s audited consolidated financial statements as of and for the fiscal year ended December 31, 2023, and the notes thereto, which are included in the Annual Report. There have been no new accounting pronouncements adopted by the Company during the 39-week period ended September 29, 2024.
Recently Issued Accounting Pronouncements Not Yet Adopted
In November 2023, the Financial Accounting Standards Board (the “FASB”) issued ASU 2023-07, Segment Reporting (Topic 280) — Improvements to Reportable Segment Disclosures (“ASU 2023-07”) in order to improve stockholders’ understanding of an entity’s business activities through enhanced disclosures around reportable segments. ASU 2023-07 will require incremental and more
7
detailed disclosure regarding segment expenses on both an annual and interim basis. For public companies ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The Company plans to adopt the standard for the year ended December 29, 2024 and will thus include any additional disclosures in its Annual Report on Form 10-K for the current fiscal year.
In December 2023, the FASB issued ASU No 2023-09, Income Taxes (Topic 740) — Improvements to Income Tax Disclosures (“ASU 2023-09”) in order to enhance the transparency and usefulness of income tax disclosures. The guidance is applicable to all entities subject to income tax and it will require disclosure of certain categories within the rate reconciliation to improve consistency as well as disclosure of reconciling items which meet a certain quantitative threshold which will improve transparency. Additionally, entities must disclose the amount of taxes paid to federal, state and foreign municipalities. For public companies, ASU 2023-09 is effective for annual periods beginning after December 15, 2024. The Company expects to adopt the standard for the fiscal year beginning December 30, 2024. The Company is currently evaluating the impact of its pending adoption of ASU 2023-09 on its consolidated financial statements.
Note 3. Investment Securities
The following table summarizes the Company’s available-for-sale investment securities as of September 29, 2024:
|
|
Amortized Cost |
|
|
Gross Unrealized Gains |
|
|
Gross Unrealized Losses |
|
|
Allowance for Credit Losses |
|
|
Fair Value |
|
|||||
U.S. corporate bonds and U.S. dollar |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||||
The following table summarizes the Company’s available-for-sale investment securities as of December 31, 2023:
|
|
Amortized Cost |
|
|
Gross Unrealized Gains |
|
|
Gross Unrealized Losses |
|
|
Allowance for Credit Losses |
|
|
Fair Value |
|
|||||
U.S. corporate bonds and U.S. dollar |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||||
Proceeds from the sale of available-for-sale securities were $
Actual maturities may differ from contractual maturities because some borrowers have the right to call or prepay obligations with or without call or prepayment penalties.
|
|
Amortized Cost |
|
|
Fair Value |
|
||
Due within one year |
|
$ |
|
|
$ |
|
||
Due after one year through five years |
|
|
|
|
|
|
||
Total available-for-sale |
|
$ |
|
|
$ |
|
||
8
The following tables present the Company’s unrealized loss aging for available-for-sale securities by type and length of time the security was in a continuous unrealized loss position as of the periods presented:
|
|
September 29, 2024 |
|
|||||||||||||||||||||
|
|
Less than 12 months |
|
|
12 months or longer |
|
|
Total |
|
|||||||||||||||
|
|
|||||||||||||||||||||||