The Simply Good Foods Company Reports Fourth Quarter and Full Fiscal Year 2020 Financial Results; Provides Fiscal First Half of Year 2021 Outlook
“In an incredibly challenging, dynamic year, we executed well against our core business initiatives, gained market share in the nutritional snacking category and completed the acquisition of Quest as well as the majority of the integration,” said
“Since the third quarter, retail takeaway for our brands, as well as the nutritional snacking category, correlated to the easing of movement restrictions related to the COVID-19 pandemic. At the height of the restrictions in the third quarter, the nutritional snacking category declined about 30% and, as movement restrictions eased late in the third quarter and into the fourth quarter, performance improved. Consequently, our retail takeaway sequentially improved from the third quarter to the fourth quarter. Not surprisingly, as the easing of restrictions plateaued in late July, category and brand performance similarly plateaued.”
“Our retail takeaway for the thirteen weeks ending
In the fourth quarter of 2020, the Company reported net income of
Outlook
“The improvement in category trends in the fiscal fourth quarter was encouraging, but there is still uncertainty related to when consumption behavior and shopping trips will return to normal levels, particularly in the mass market retail channel. The unknown duration of these challenges make it difficult to provide a full-year fiscal 2021 outlook at this time. Due to our variable business model, however, we anticipate full year gross margin to be about the same as last year and Adjusted EBITDA margin to increase. Additionally, we remain on track to achieve the Quest acquisition synergies and the divestiture of the SimplyProtein® brand will be a slight headwind to net sales growth. In the first half of fiscal 2021 we expect retail takeaway will be somewhat similar to current trends, therefore, we anticipate first half of fiscal 2021 net sales will be in the
“We remain confident in our business model and long-term growth prospects. We also believe that when the reopening of the
Thirteen-Weeks Ended
- Net sales increased 59.7%, or
$83.1 million , to$222.3 million - Gross profit margin of 39.6%, a decrease of 290 basis points
- Net income increased 104.0% to
$12.4 million versus$6.1 million , primarily related to the Quest acquisition - Adjusted EBITDA(1) increased 53.5% to
$37.0 million , primarily related to the Quest acquisition - Earnings per diluted share (“EPS”) of
$0.12 , an increase of$0.05 per fully diluted share - Adjusted Diluted EPS(2) of
$0.20 versus$0.15
Net sales increased
Gross profit was
In the fourth quarter of 2020, the Company reported net income of
Interest expense was
Adjusted EBITDA(1), a non-GAAP financial measure used by the Company that makes certain adjustments to net income calculated under GAAP, increased 53.5% to
In the fourth quarter of 2020, the Company reported Diluted Earnings Per Share of
Fifty-Two Weeks Ended
- Net sales increased 56.0%, or
$293.3 million , to$816.6 million - Gross profit margin of 39.7%, a decrease of 180 basis points
- Includes a non-cash
$7.5 million inventory purchase accounting step-up adjustment related to the Quest acquisition
- Includes a non-cash
- Income tax expense was
$13.3 million versus$16.8 million - Net income decreased
$12.8 million , or 27.0%, to$34.7 million , primarily due to costs associated with the Quest acquisition - Adjusted EBITDA(1) increased 55.9%, to
$153.9 million - Earnings per diluted share (“EPS”) of
$0.35 , a decrease of$0.21 per fully diluted share - Adjusted Diluted EPS(21) of
$0.91 , an increase of$0.14 per fully diluted share
Net sales increased
Gross profit was
Net income was
- a 40.0% increase in selling and marketing expenses primarily due to the inclusion of Quest;
- a
$44.3 million increase in general and administrative expenses to$106.3 million as a result of:- the inclusion of Quest;
- integration expenses of
$10.7 million ; - restructuring costs of
$5.5 million ; and, - lower legacy Atkins general and administrative expenses, primarily due to lower incentive compensation;
- business transaction costs of
$27.1 million ; - the previously mentioned Simply Protein® brand impairment charge;
- higher interest expense of about
$19.2 million due to an increase in the principal amount of the Company’s term loan related to the financing for the Quest acquisition.
Adjusted EBITDA(1), a non-GAAP financial measure used by the Company that makes certain adjustments to net income calculated under GAAP, increased 55.9% to
For the full year, the Company reported Diluted Earnings Per Share of
Balance Sheet and Cash Flow
Building on last quarter’s momentum, cash flow from operations in the fourth quarter was
________________________________________
(1) Adjusted EBITDA is a non-GAAP financial measure. Please refer to “Reconciliation of Adjusted EBITDA” in this press release for an explanation and reconciliation of this non-GAAP financial measure.
(2) Adjusted Diluted Earnings per Share is a non-GAAP financial measure. The Company excludes acquisition related costs, such as business transaction costs, integration expense and depreciation and amortization expense in calculating Adjusted Diluted Earnings Per Share. Please refer to “Reconciliation of Adjusted Diluted Earnings Per Share” in this press release for an explanation and reconciliation of this non-GAAP financial measure.
(3) The Company does not provide an estimate of consolidated net income or a forward-looking reconciliation of Adjusted Diluted Earnings Per Share to Earnings Per Share or Adjusted EBITDA to Net Income, the most directly comparable GAAP financial measures, expected for 2021, because we are unable to provide such a reconciliation without unreasonable effort due to the unavailability of reliable estimates for certain components of consolidated net income and the respective reconciliations, including the timing of and amount of integration costs and restructuring charges associated with the Quest acquisition, and the inherent difficulty of predicting what the changes in these components will be throughout the fiscal year. As these items may vary greatly between periods, we are unable to address the probable significance of the unavailable information, which could significantly affect our future financial results.
(4) Net Debt to Adjusted EBITDA is a non-GAAP financial measure. Please refer to “Reconciliation of Net Debt to Adjusted EBITDA” in this press release for an explanation and reconciliation of this non-GAAP financial measure.
Conference Call and Webcast Information
The Company will host a conference call with members of the executive management team to discuss these results today,
In addition, the call and accompanying presentation slides will be broadcast live over the Internet hosted at the “Investor Relations” section of the Company's website at http://www.thesimplygoodfoodscompany.com. A telephone replay will be available approximately two hours after the call concludes and will be available through
About
Forward Looking Statements
Certain statements made herein are not historical facts but are forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. Forward-looking statements generally are accompanied by or include words such as “will”, “expect”, “intends” or other similar words, phrases or expressions. These forward-looking statements include the expected effects from the COVID-19 outbreak, statements regarding the integration of Quest, future plans for the Company, the estimated or anticipated future results and benefits of the Company’s future plans and operations, future capital structure, future opportunities for the Company, and other statements that are not historical facts. These statements are based on the current expectations of the Company’s management and are not predictions of actual performance. These statements are subject to a number of risks and uncertainties and the Company’s business and actual results may differ materially. These risks and uncertainties include, but are not limited to the effect of the COVID-19 outbreak on the Company's business, suppliers (including its contract manufacturing and logistics suppliers), customers, consumers and employees along with disruptions or inefficiencies in the supply chain resulting from any effects of the COVID-19 outbreak; achieving the anticipated benefits of the Quest acquisition; difficulties and delays in achieving the synergies and cost savings in connection with the Quest acquisition; changes in the business environment in which the Company operates including general financial, economic, capital market, regulatory and political conditions affecting the Company and the industry in which the Company operates; changes in consumer preferences and purchasing habits; the Company’s ability to maintain adequate product inventory levels to timely supply customer orders; changes in taxes, tariffs, duties, governmental laws and regulations; the availability of or competition for other brands, assets or other opportunities for investment by the Company or to expand the Company’s business; competitive product and pricing activity; difficulties of managing growth profitably; the loss of one or more members of the Company’s or Quest’s management team; and other risk factors described from time to time in the Company’s Form 10-K, Form 10-Q, and Form 8-K reports (including all amendments to those reports) filed with the
Investor Contact
Vice President, Investor Relations,
(720) 768-2681
mpogharian@simplygoodfoodsco.com
Consolidated Balance Sheets
(Dollars in thousands, except share data)
| Assets | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 95,847 | $ | 266,341 | |||||
| Accounts receivable, net | 89,740 | 44,240 | |||||||
| Inventories | 59,085 | 38,085 | |||||||
| Prepaid expenses | 3,644 | 2,882 | |||||||
| Other current assets | 11,947 | 6,059 | |||||||
| Total current assets | 260,263 | 357,607 | |||||||
| Long-term assets: | |||||||||
| Property and equipment, net | 11,850 | 2,456 | |||||||
| Intangible assets, net | 1,158,768 | 306,139 | |||||||
| 544,774 | 471,427 | ||||||||
| Other long-term assets | 32,790 | 4,021 | |||||||
| Total assets | $ | 2,008,445 | $ | 1,141,650 | |||||
| Liabilities and stockholders' equity | |||||||||
| Current liabilities: | |||||||||
| Accounts payable | $ | 32,240 | $ | 15,730 | |||||
| Accrued interest | 960 | 1,693 | |||||||
| Accrued expenses and other current liabilities | 38,007 | 29,933 | |||||||
| Current maturities of long-term debt | 271 | 676 | |||||||
| Total current liabilities | 71,478 | 48,032 | |||||||
| Long-term liabilities: | |||||||||
| Long-term debt, less current maturities | 596,879 | 190,259 | |||||||
| Deferred income taxes | 84,352 | 65,383 | |||||||
| Other long-term liabilities | 22,765 | 532 | |||||||
| Total liabilities | 775,474 | 304,206 | |||||||
| Stockholders' equity: | |||||||||
| Preferred stock, |
— | — | |||||||
| Common stock, |
958 | 820 | |||||||
| (2,145 | ) | (2,145 | ) | ||||||
| Additional paid-in-capital | 1,094,507 | 733,775 | |||||||
| Retained earnings | 140,530 | 105,830 | |||||||
| Accumulated other comprehensive loss | (879 | ) | (836 | ) | |||||
| Total stockholders' equity | 1,232,971 | 837,444 | |||||||
| Total liabilities and stockholders' equity | $ | 2,008,445 | $ | 1,141,650 | |||||
Consolidated Statements of Operations and Comprehensive Income
(In thousands, except share data)
| 13-Weeks Ended | 14-Weeks Ended | 52-Weeks Ended | 53-Weeks Ended | |||||||||||||
| Net sales | $ | 222,286 | $ | 139,184 | $ | 816,641 | $ | 523,383 | ||||||||
| Cost of goods sold | 134,184 | 80,011 | 492,313 | 305,978 | ||||||||||||
| Gross profit | 88,102 | 59,173 | 324,328 | 217,405 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling and marketing | 24,484 | 19,890 | 94,469 | 67,488 | ||||||||||||
| General and administrative | 31,290 | 20,295 | 106,251 | 61,972 | ||||||||||||
| Depreciation and amortization | 4,271 | 1,853 | 15,259 | 7,496 | ||||||||||||
| Business transaction costs | 225 | 5,020 | 27,125 | 7,107 | ||||||||||||
| Loss on impairment | 3,000 | — | 3,000 | — | ||||||||||||
| Loss in fair value change of contingent consideration - TRA liability | — | — | — | 533 | ||||||||||||
| Total operating expenses | 63,270 | 47,058 | 246,104 | 144,596 | ||||||||||||
| Income from operations | 24,832 | 12,115 | 78,224 | 72,809 | ||||||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | 23 | 1,095 | 1,516 | 3,826 | ||||||||||||
| Interest expense | (8,931 | ) | (3,594 | ) | (32,813 | ) | (13,627 | ) | ||||||||
| Gain (loss) on foreign currency transactions | 1,254 | (31 | ) | 658 | (452 | ) | ||||||||||
| Gain on settlement of TRA liability | — | — | — | 1,534 | ||||||||||||
| Other income | 337 | 20 | 441 | 196 | ||||||||||||
| Total other expense | (7,317 | ) | (2,510 | ) | (30,198 | ) | (8,523 | ) | ||||||||
| Income before income taxes | 17,515 | 9,605 | 48,026 | 64,286 | ||||||||||||
| Income tax expense | 5,088 | 3,514 | 13,326 | 16,750 | ||||||||||||
| Net income | $ | 12,427 | $ | 6,091 | $ | 34,700 | $ | 47,536 | ||||||||
| Other comprehensive income (loss): | ||||||||||||||||
| Foreign currency translation adjustments | 37 | 254 | (43 | ) | (38 | ) | ||||||||||
| Comprehensive income | $ | 12,464 | $ | 6,345 | $ | 34,657 | $ | 47,498 | ||||||||
| Earnings per share from net income: | ||||||||||||||||
| Basic | $ | 0.13 | $ | 0.07 | $ | 0.37 | $ | 0.59 | ||||||||
| Diluted | $ | 0.12 | $ | 0.07 | $ | 0.35 | $ | 0.56 | ||||||||
| Weighted average shares outstanding: | ||||||||||||||||
| Basic | 95,449,194 | 81,847,429 | 93,968,953 | 80,734,091 | ||||||||||||
| Diluted | 99,578,110 | 86,888,528 | 98,343,722 | 85,243,909 | ||||||||||||
Consolidated Statements of Cash Flows
(In thousands)
| 52-Weeks Ended | 53-Weeks Ended | |||||||
| Operating activities | ||||||||
| Net income | $ | 34,700 | $ | 47,536 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 16,007 | 7,644 | ||||||
| Amortization of deferred financing costs and debt discount | 3,508 | 1,352 | ||||||
| Stock compensation expense | 7,636 | 5,501 | ||||||
| Loss on impairment | 3,000 | — | ||||||
| Loss in fair value change of contingent consideration - TRA liability | — | 533 | ||||||
| Gain on settlement of TRA liability | — | (1,534 | ) | |||||
| Unrealized loss (gain) on foreign currency transactions | (658 | ) | 452 | |||||
| Deferred income taxes | 8,216 | 10,908 | ||||||
| Loss on disposal of property and equipment | — | 6 | ||||||
| Amortization of operating lease right-of-use asset | 3,848 | — | ||||||
| Other | (389 | ) | — | |||||
| Changes in operating assets and liabilities, net of acquisition: | ||||||||
| Accounts receivable, net | (18,288 | ) | (7,985 | ) | ||||
| Inventories | 23,880 | (8,272 | ) | |||||
| Prepaid expenses | 680 | (824 | ) | |||||
| Other current assets | (5,022 | ) | (2,155 | ) | ||||
| Accounts payable | (8,736 | ) | 4,734 | |||||
| Accrued interest | (733 | ) | 1,111 | |||||
| Accrued expenses and other current liabilities | (5,572 | ) | 13,961 | |||||
| Other | (3,156 | ) | 74 | |||||
| Net cash provided by operating activities | 58,921 | 73,042 | ||||||
| Investing activities | ||||||||
| Purchases of property and equipment | (1,736 | ) | (1,037 | ) | ||||
| Proceeds from sale of property and equipment | — | — | ||||||
| Issuance of note receivable | (500 | ) | (750 | ) | ||||
| Proceeds from note receivable | 1,250 | — | ||||||
| Acquisition of business, net of cash acquired | (982,075 | ) | — | |||||
| Investments in intangible assets and other assets | (933 | ) | — | |||||
| Net cash used in investing activities | (983,994 | ) | (1,787 | ) | ||||
| Financing activities | ||||||||
| Proceeds from option exercises | 4,206 | 706 | ||||||
| Cash received from warrant exercises | — | 113,464 | ||||||
| Tax payments related to issuance of restricted stock units | (191 | ) | (181 | ) | ||||
| Proceeds from issuance of common stock | 352,542 | — | ||||||
| Equity issuance costs | (3,323 | ) | — | |||||
| Repurchase of common stock | — | (2,145 | ) | |||||
| Payments on finance lease obligations | (374 | ) | — | |||||
| Principal payments of long-term debt | (50,000 | ) | (2,000 | ) | ||||
| Repayments of Revolving Credit Facility | (25,000 | ) | — | |||||
| Proceeds from issuance of long term debt | 460,000 | — | ||||||
| Proceeds from Revolving Credit Facility | 25,000 | — | ||||||
| Deferred financing costs | (8,208 | ) | — | |||||
| Settlement of TRA liability | — | (26,468 | ) | |||||
| Net cash provided by financing activities | 754,652 | 83,376 | ||||||
| Cash and cash equivalents | ||||||||
| Net (decrease) increase in cash | (170,421 | ) | 154,631 | |||||
| Effect of exchange rate on cash | (73 | ) | (261 | ) | ||||
| Cash at beginning of period | 266,341 | 111,971 | ||||||
| Cash and cash equivalents at end of period | $ | 95,847 | $ | 266,341 | ||||
Reconciliation of Adjusted EBITDA
Adjusted EBITDA. Adjusted EBITDA is a non-GAAP financial measure commonly used in our industry and should not be construed as an alternative to net (loss) income as an indicator of operating performance or as an alternative to cash flow provided by operating activities as a measure of liquidity (each as determined in accordance with GAAP).
The following unaudited tables below provide a reconciliation of Adjusted EBITDA to its most directly comparable GAAP measure, which is net income, for the thirteen weeks ended
| (In thousands) |
13-Weeks Ended | 14-Weeks Ended | 52-Weeks Ended | 53-Weeks Ended | ||||||||||||
| Net income | $ | 12,427 | $ | 6,091 | $ | 34,700 | $ | 47,536 | ||||||||
| Interest expense | 8,931 | 3,594 | 32,813 | 13,627 | ||||||||||||
| Interest income | (23 | ) | (1,095 | ) | (1,516 | ) | (3,826 | ) | ||||||||
| Income tax expense (benefit) | 5,088 | 3,514 | 13,326 | 16,750 | ||||||||||||
| Depreciation and amortization | 4,400 | 1,853 | 16,007 | 7,644 | ||||||||||||
| EBITDA | 30,823 | 13,957 | 95,330 | 81,731 | ||||||||||||
| Business transaction costs | 225 | 5,020 | 27,125 | 7,107 | ||||||||||||
| Stock-based compensation expense | 1,691 | 1,579 | 7,636 | 5,501 | ||||||||||||
| Inventory step-up | — | — | 7,522 | — | ||||||||||||
| Integration of Quest | 1,307 | — | 10,742 | — | ||||||||||||
| Restructuring | 4,141 | — | 5,527 | 22 | ||||||||||||
| Non-core legal costs | 115 | 3,521 | 718 | 4,851 | ||||||||||||
| Loss (gain) in fair value change of contingent consideration - TRA liability | — | — | — | 533 | ||||||||||||
| Gain on settlement of TRA | — | — | — | (1,534 | ) | |||||||||||
| Frozen licensing media | — | — | — | — | ||||||||||||
| Other (1) | (1,279 | ) | 49 | (688 | ) | 508 | ||||||||||
| Adjusted EBITDA | $ | 37,023 | $ | 24,126 | $ | 153,912 | $ | 98,719 | ||||||||
(1) Other items consist principally of exchange impact of foreign currency transactions and other expenses.
Reconciliation of Adjusted Diluted Earnings Per Share
Adjusted Diluted Earnings per Share. Adjusted Diluted Earnings per Share is a non-GAAP financial measure commonly used in our industry and should not be construed as an alternative to diluted earnings per share as an indicator of operating performance.
The following unaudited tables below provide a reconciliation of Adjusted Diluted Earnings Per Share to its most directly comparable GAAP measure, which is diluted earnings per share, thirteen weeks ended
| 13-Weeks Ended | 14-Weeks Ended | 52-Weeks Ended | 53-Weeks Ended | |||||||||||||
| Diluted earnings per share | $ | 0.12 | $ | 0.07 | $ | 0.35 | $ | 0.56 | ||||||||
| Depreciation and amortization | 0.03 | (0.01 | ) | 0.12 | 0.07 | |||||||||||
| Business transaction costs | — | 0.04 | 0.20 | 0.06 | ||||||||||||
| Stock-based compensation expense | 0.01 | 0.01 | 0.06 | 0.05 | ||||||||||||
| Inventory step-up | — | — | 0.06 | — | ||||||||||||
| Integration of Quest | 0.01 | — | 0.08 | — | ||||||||||||
| Restructuring | 0.03 | (0.01 | ) | 0.04 | — | |||||||||||
| Non-core legal costs | — | 0.03 | 0.01 | 0.04 | ||||||||||||
| Loss (gain) in fair value change of contingent consideration - TRA liability | — | 0.03 | — | — | ||||||||||||
| Gain on settlement of TRA liability | — | (0.01 | ) | — | (0.01 | ) | ||||||||||
| Other (1) | (0.01 | ) | — | (0.01 | ) | — | ||||||||||
| Rounding (2) | 0.01 | — | — | — | ||||||||||||
| Adjusted diluted earnings per share | $ | 0.20 | $ | 0.15 | $ | 0.91 | $ | 0.77 | ||||||||
(1) Other items consist principally of exchange impact of foreign currency transactions and other expenses.
(2) Adjusted Diluted Earnings Per Share amounts are computed independently for each quarter. Therefore, the sum of the quarterly Adjusted Diluted Earnings Per Share amounts may not equal the year to date Adjusted Diluted Earnings Per Share amounts due to rounding.
Reconciliation of Net Debt to Adjusted EBITDA
Net Debt to Adjusted EBITDA. Net Debt to Adjusted EBITDA is a non-GAAP financial measure which
The following unaudited table below provides a reconciliation of Net Debt to Adjusted EBITDA as of
| (In thousands | ||||
| Total debt outstanding under the Credit Agreement | $ | 606,500 | ||
| Less: cash and cash equivalents | (95,847 | ) | ||
| Net Debt | $ | 510,653 | ||
| Adjusted EBITDA | 153,912 | |||
| Net Debt to Adjusted EBITDA | 3.3x | |||
Source: The Simply Good Foods Company