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What changed in Simply Good Foods Co's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Simply Good Foods Co's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+369 added−416 removedSource: 10-K (2023-10-24) vs 10-K (2022-10-21)

Top changes in Simply Good Foods Co's 2023 10-K

369 paragraphs added · 416 removed · 322 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

89 edited+21 added−22 removed68 unchanged
Biggest changeThis practice provides every qualified candidate an opportunity to apply with knowledge of the range of pay for the role. • We are committed to interviewing diverse candidates for open corporate leadership positions. • Environmental, social and governance (“ESG”) initiatives are included as part of the determination of the discretionary component of our annual short-term incentive program. • All employees are required to attend preventing discrimination and harassment training. • We observe Juneteenth as a company-paid holiday every year in the United States as a day of reflection, education, and celebration. 14 The table below provides information as of August 27, 2022, the end of our fiscal year, about the representation of women and minorities as a percentage of our employees at various levels of management categories used by our Executive Leadership Team to manage our workforce.
Biggest changeThis practice provides every qualified candidate an opportunity to apply with knowledge of the range of pay for the role. • Environmental, social and governance (“ESG”) initiatives are included as part of the determination of the discretionary component of our annual short-term incentive program. • All employees are required to attend preventing discrimination and harassment training. • We observe Juneteenth as a company-paid holiday every year in the United States as a day of reflection, education, and celebration.
With our Atkins brand, we strive to offer a compelling line of protein bars, RTD shakes, cookies, protein chips and salty snacks, and confections, and with our Quest brand, we strive to offer an attractive line up of protein bars, cookies, protein chips and salty snacks, RTD shakes, and confections, which target these existing and emerging consumer trends.
With our Quest brand, we strive to offer an attractive line up of protein bars, cookies, protein chips and salty snacks, RTD shakes, and confections, which target these existing and emerging consumer trends. With our Atkins brand, we strive to offer a compelling line of protein bars, RTD shakes, cookies, protein chips and salty snacks, and confections.
We are a leader in the fast growing nutritional snacking category, and both the Atkins and Quest brands are leading brands with combined scale in protein bars, protein chips, confections, cookies, and RTD shakes. Our highly focused snacking portfolio provides us with a leading position within retailers’ nutrition and wellness aisles, resulting in meaningful shelf space.
We are a leader in the fast growing nutritional snacking category, and both the Quest and Atkins brands are leading brands with combined scale in protein bars, protein chips, confections, cookies, and RTD shakes. Our highly focused snacking portfolio provides us with a leading position within retailers’ nutrition and wellness aisles, resulting in meaningful shelf space.
We also believe our portfolio of convenient and nutritious products and our ongoing effort to meet consumer demands for convenient options to support their individual health, nutrition and lifestyle goals. Scalable snacking and food platform. We have been able to grow our product offerings for both of our nutritious snacking brands through our line extensions and through acquisitions.
We also believe our portfolio of convenient and nutritious products and our ongoing effort to meet consumer demands for convenient snacking options support their individual health, nutrition and lifestyle goals. Scalable snacking and food platform. We have been able to grow our product offerings for both of our nutritious snacking brands through our line extensions and through acquisitions.
We use coupons (freestanding insert newspaper, store register, on-pack and online coupons) to help stimulate product trial and repeat purchases by providing consumers with economic incentives. The mix of these marketing activities varies between the Atkins and Quest brands.
We use coupons (freestanding insert newspaper, store register, on-pack and online coupons) to help stimulate product trial and repeat purchases by providing consumers with economic incentives. The mix of these marketing activities varies between the Quest and Atkins brands.
We sell our products on Atkins.com , questnutrition.com, Amazon.com and e-commerce platforms of our brick-and-mortar customers, which all deliver our products directly to the location designated by the consumer. Food Safety and Quality. Food safety and quality is a top priority, and we dedicate substantial resources to ensure that consumers receive safe, high quality food products.
We sell our products on questnutrition.com, Atkins.com , Amazon.com and e-commerce platforms of our brick-and-mortar customers, which all deliver our products directly to the location designated by the consumer. Food Safety and Quality. Food safety and quality is a top priority, and we dedicate substantial resources to ensure that consumers receive safe, high quality food products.
Through our websites and social media, we also share educational information to explain each brand’s approach to nutrition, teaching consumers how to make smarter food choices and the nutritional qualities of our nutritional approach and our products.
Through our websites and social media, we also share educational information to explain each brand’s approach to nutrition, teaching consumers how to make smarter food choices and the nutritional qualities of our approach and products.
Our compensation philosophy is to pay for performance, and we do so through a mix of base salary, annual short-term incentive and long-term incentive. 15 We understand that each employee's situation is unique, so we offer benefits that can be shaped and molded by each employee to fit their individual or family's needs.
Our compensation philosophy is to pay for performance, and we do so through a mix of base salary, annual short-term incentive and long-term incentive. We understand that each employee's situation is unique, so we offer benefits that can be shaped and molded by each employee to fit their individual or family's needs.
As part of our advocacy on the advantages of a protein-rich, low-carbohydrate, and low-sugar dietary approach, we have devoted portions of our respective brand websites and social media to promote consumer education, engagement, and dialogue about the benefits of our nutritional approaches and how our products can fit within those approaches.
As part of our advocacy on the advantages of a protein-rich, low-carbohydrate, and low-sugar dietary approach, we have devoted portions of our respective brand websites and social media to promote consumer education, engagement, and dialogue about the benefits of 14 our nutritional approaches and how our products can fit within those approaches.
Governments may in the future implement new laws, regulations and directives aimed to meet certain climate change goals and objectives which could affect our business operations as they relate to ingredient and packaging procurement. 13 We believe that we are in material compliance with existing environmental regulations applicable to our business.
Governments may in the future implement new laws, regulations and directives aimed to meet certain climate change goals and objectives which could affect our business operations as they relate to ingredient and packaging procurement. We believe that we are in material compliance with existing environmental regulations applicable to our business.
For the majority of our customers, our logistics provider distributes the finished goods via truckloads from our Distribution Centers, which first flow through regional terminals. At the terminals, our orders are consolidated with other companies’ products being shipped to the customer. The finished goods are then distributed to retailer distribution centers.
For the majority of our customers, our logistics provider distributes the finished goods via truckloads from our Distribution Centers, which first flow through regional terminals. At the terminals, our orders are consolidated with other companies’ 10 products being shipped to the customer. The finished goods are then distributed to retailer distribution centers.
We also own virtually all of the recipes and specifications for our products. Competition We compete primarily with nutritional snacking brands in large retail and e-commerce environments. The nutritional snacking industry is fragmented and highly competitive and includes a number of diverse competitors.
We also own virtually all of the recipes and specifications for our products. 9 Competition We compete primarily with nutritional snacking brands in large retail and e-commerce environments. The nutritional snacking industry is fragmented and highly competitive and includes a number of diverse competitors.
The majority of our products are shipped directly to one central warehouse, which is a leased warehouse managed by a third-party logistics provider. We also have a separate warehouse for a portion of our distribution needs. A substantial portion of our inventory is shipped directly to our retailers from this warehouse by the same third-party logistics provider.
The majority of our products are shipped directly to one central warehouse, which is a leased warehouse managed by a third-party logistics provider. We also have a separate warehouse for a portion of our distribution needs. A substantial portion of our inventory is shipped directly to our retailers from the warehouse by the same third-party logistics provider.
Our brands are able to appeal to both consumers interested in an active lifestyle who are seeking protein-rich, low-carb snacking options as well as weight management program consumers, which makes our brands highly attractive and strategic for a diverse set of retailers across various distribution channels. Aligned with consumer mega trends.
Our brands can appeal to both consumers interested in an active lifestyle who are seeking protein-rich, low-carb snacking options as well as weight management program consumers, which makes our brands highly attractive and strategic for a diverse set of retailers across various distribution channels. Aligned with consumer mega trends.
Our management believes there is opportunity for the brands to further penetrate those channels as well as other distribution channels such as convenience and club stores.
Our management believes there is opportunity for the brands to further penetrate those channels as well as other 6 distribution channels such as convenience and club stores.
Offered in flavors including nacho cheese, ranch, chili lime, BBQ, loaded taco and spicy sweet chili, Quest’s chips typically contain about 18 grams of protein, about 4 grams of net carbs, and around 6 grams of fat compared to 2 grams of protein, 15 grams of net carbs and 8 grams of fat for a well-known leading conventional brand. Confections.
Offered in flavors including nacho cheese, ranch, chili lime, BBQ, loaded taco and spicy sweet chili, Quest’s chips typically contain about 18 grams of protein, about 4 grams of net 7 carbs, and around 6 grams of fat compared to 2 grams of protein, 15 grams of net carbs and 8 grams of fat for a well-known leading conventional brand.
We intend to continue to enhance, strengthen and expand our product offerings with new and innovative flavors and forms and packaging alternatives, all while maintaining a commitment to delivering products that meet our nutritional profile and provide the convenience that consumers crave.
We intend to continue to enhance, strengthen and expand our product offerings with new and innovative flavors and forms and packaging alternatives, all while maintaining a commitment to delivering products that meet our targeted nutritional profile and provide the convenience and taste consumers crave.
The product portfolio we develop, market and sell consists primarily of protein bars, ready-to-drink (“RTD”) shakes, sweet and salty snacks and confectionery products marketed under the Atkins®, Atkins Endulge®, Quest® and Quest Hero TM brand names. Simply Good Foods is poised to expand its wellness platform through innovation and organic growth along with acquisition opportunities in the nutritional snacking space.
The product portfolio we develop, market and sell consists primarily of protein bars, ready-to-drink (“RTD”) shakes, sweet and salty snacks and confectionery products marketed under the Quest® and Atkins® brand names. Simply Good Foods is poised to expand its wellness platform through innovation and organic growth along with acquisition opportunities in the nutritional snacking space.
Our in-house product development experience, combined with our outsourced manufacturing model, allow us to bring new products to market quickly. We pride ourselves on knowing our consumers and gleaning insights that lead to new products and ideas.
Our in-house product development experience and our outsourced manufacturing model allow us to bring new products to market quickly. We pride ourselves on knowing our consumers and gleaning insights that lead to new products and ideas.
We plan to continue conducting extensive consumer research to develop successful new products including product flavor and concept testing, marketing and trend analysis, and consumer prototype testing. Management also believes the fragmented snacking category presents an opportunity for consolidation and the opportunity to build, through disciplined acquisitions, a leading platform in the nutritional snacking space.
We plan to continue conducting extensive consumer research to develop successful new products including product flavor and concept testing, marketing and trend analysis, and consumer prototype testing. We also believe the fragmented snacking category presents an opportunity for consolidation and the opportunity to build, through disciplined acquisitions, a leading platform in the nutritional snacking space.
In our normal performance review cycle, which took place in early fiscal year 2022, 99% of our employees held career discussions with their managers to identify opportunities for development and career progression.
In our normal performance review cycle, which took place in early fiscal year 2023, 99% of our employees held career discussions with their managers to identify opportunities for development and career progression.
We are not, however, including the information contained on our website, or information that may be accessed through links on our website, as part of, or incorporating such information by reference into, this Report. 17
We are not, however, including the information contained on our website, or information that may be accessed through links on our website, as part of, or incorporating such information by reference into, this Report. 15
The cost of sourcing our ingredients and packaging has been affected by the 11 current elevated levels of supply chain cost inflation in the United States and elsewhere. For more information, see “ – Business Trends in Fiscal Year 2022 ,” above. Manufacturing. We rely on contract manufacturers to manufacture our products.
The cost of sourcing our ingredients and packaging has been affected by the current elevated levels of supply chain cost inflation in the United States and elsewhere. For more information, see “ – Business Trends in Fiscal Year 2023 ,” above. Manufacturing. We rely on contract manufacturers to manufacture our products.
As a leader in nutritious snacking, 10 management believes we have the unique capability to leverage our operating platform and customer relationships to expand beyond our current brands. Our experienced management team has deep expertise in brand building to expand the business into additional brands and products in the nutritional snacking segment.
As a leader in nutritious snacking, we believe we have the unique capability to leverage our operating platform and customer relationships to expand beyond our current brands. Our experienced management team has deep expertise in brand building to expand the business into additional brands and products in the nutritional snacking segment.
Increasing global concern about growing rates of obesity and weight-related diseases and other health issues has resulted in increased scientific, media and consumer focus on nutrition. Over 100 independent, peer reviewed, clinical studies show the benefits of controlling carbohydrates. Management believes this focus is prompting consumers to rebalance their nutritional breakdown away from carbohydrates.
Increasing global concern about growing rates of obesity and weight-related diseases and other health issues has resulted in increased scientific, media and consumer focus on nutrition. Over 100 independent, peer reviewed, clinical studies show the benefits of controlling carbohydrates. We believe this focus is prompting consumers to rebalance their nutritional breakdown away from carbohydrates.
Our current benefits vary by region, but generally include medical, dental and vision insurance, 401(k) retirement plan, savings accounts, life and disability insurance coverage, free mental telehealth support, and other voluntary benefits. We also offer time-off benefits including vacation time, flexible vacation for exempt positions, sick leave, and paid parental leave. Employee Safety and Wellbeing Measures.
Our current benefits vary by region, but generally include medical, dental and vision insurance, 401(k) retirement plan, savings accounts, life and disability insurance coverage, free mental telehealth support, and other voluntary benefits. We also offer time-off benefits including vacation time, flexible vacation for exempt positions, sick leave, and paid parental leave.
For our Quest brand, we launched a national, targeted broadcast ad campaign, and continue to leverage targeted streaming television ads and an extensive network of social media influencers and content creators who prompt our Quest brand products through their online posts to motivate new buyers and new product introductions.
For our Quest brand, we have used a national, targeted broadcast ad campaign, and continue to leverage targeted streaming television ads and an extensive network of social media influencers and content creators who prompt both our Quest brand products through their online posts to motivate new buyers and product introductions.
Our in-house research and development laboratories allow us to develop new products internally and bring them to market quickly through our contract manufacturing network without diverging from high standards of taste, nutritional content, quality, and safety. Additionally, we intend to satisfy developing and changing consumer preferences through the pursuit of merger and acquisition transactions. Expand distribution in white space opportunities.
Our in-house research and development laboratories allow us to develop new products internally and bring them to market quickly through our contract manufacturing network without diverging from high standards of taste, nutritional content, quality, and safety. Additionally, we intend to satisfy developing and changing consumer preferences through the pursuit of merger and acquisition transactions.
Because of these career discussions, the accelerated mentorship program and the talent review process conducted by our senior leadership, during fiscal year 2022, we promoted 11% of our workforce and provided associated compensation increases. Our Commitment to Diversity, Equity & Inclusion (“DE&I”) .
Because of these career discussions, the accelerated mentorship program and the talent review process conducted by our senior leadership, during fiscal year 2023, we promoted 8% of our workforce and provided associated compensation increases. Our Commitment to Diversity, Equity & Inclusion (“DE&I”) .
Accordingly, we are committed to continually finding new and innovative formulations to reduce the number of ingredients in our products, as well as using “better-for-you” ingredients like nuts, fiber and whey protein, while continually improving taste and quality. We maintain an in-house research and development team as well as market research and consumer insight capabilities.
We are committed to continually finding new and innovative formulations for our products, as well as using “better-for-you” ingredients like nuts, fiber and whey protein, while continually improving taste and quality. We maintain an in-house research and development team as well as market research and consumer insight capabilities.
We believe that the principal competitive factors in the nutritional snacking and weight management industries are: • brand awareness and loyalty among consumers; • product ingredients; • macronutrient profile of products; • product claims; • product taste; • convenience of products; • media spending; • product variety, packaging and labeling; and • access to retailer shelf space.
We believe that the principal competitive factors in the nutritional snacking industry are: • brand awareness and loyalty among consumers; • product ingredients; • macronutrient profile of products; • product claims; • product taste and texture; • convenience of products; • media spending; • product variety, packaging and labeling; and • access to retailer shelf space.
In the fifty-two weeks ended August 27, 2022, approximately 69% of Selling and marketing expenses were spent on advertising costs. Product Innovation A portion of our sales is driven by new products, and as a result, we believe innovation is, and will continue to be, an important component of our business.
In the fifty-two weeks ended August 26, 2023, approximately 66% of Selling and marketing expenses were spent on advertising costs. Product Innovation A portion of our sales is driven by new products, and as a result, we believe innovation is, and will continue to be, an important component of our business.
We are also subject to various state and local consumer protection laws. We believe we are in material compliance with all labeling laws and regulations applicable to our business. Human Capital Resources As of August 27, 2022, our workforce consisted of 260 employees globally who were largely based in an office or in research and development (“R&D”) lab locations.
We are also subject to various state and local consumer protection laws. We believe we are in material compliance with all labeling laws and regulations applicable to our business. 12 Human Capital Resources As of August 26, 2023, our workforce consisted of 271 employees globally who were largely based in an office or in research and development (“R&D”) lab locations.
A substantial majority of our sales are generated from a limited number of retailers. Sales to our largest retailer, Walmart, represented approximately 31% of consolidated sales in fiscal year 2022, of which approximately 23% is through their mass retail channel and approximately 8% is through their Sam’s club and e-commerce channels.
A substantial majority of our sales are generated from a limited number of retailers. Sales to our largest retailer, Walmart, represented approximately 31% of consolidated sales in fiscal year 2023, of which approximately 24% is through their mass retail channel and approximately 7% is through their Sam’s club and e-commerce channels.
The FDA: • regulates manufacturing practices for foods through its current good manufacturing practices regulations; • specifies the standards of identity for certain foods, including many of the products we sell; and • prescribes the format and content of certain information required to appear on food product labels.
The FDA: • regulates manufacturing practices for foods through its current good manufacturing practices regulations; • specifies the standards of identity for certain foods, including many of the products we sell; • regulates the advertising claims that can be made on food product labels; and • prescribes the format and content of certain information required to appear on food product labels.
In addition, while shoppers have increased e-commerce purchases generally, approximately 12% of Atkins’ gross sales for the fifty-two weeks ended August 27, 2022, were through its e-commerce channel and approximately 21% of Quest’s gross sales for the same period were through its e-commerce channel.
In addition, while shoppers have increased e-commerce purchases generally, approximately 21% of Quest’s gross sales for the fifty-two weeks ended August 26, 2023 were through its e-commerce channel and approximately 14% of Atkins’ gross sales for the same period were through its e-commerce channel.
For the manufacture of our products, we subcontract with contract manufacturers, and as a result, our operations are highly flexible and require minimal capital expenditure. The supply chain for our international business also uses exclusively contract manufacturers. U.S. Supply Chain .
Supply Chain We operate an asset-light business model. For the manufacture of our products, we contract with contract manufacturers, and as a result, our operations are highly flexible and require minimal capital expenditure. The supply chain for our international business also uses exclusively contract manufacturers. U.S. Supply Chain .
Our Vision and Mission Our vision is to lead the nutritional snacking movement with trusted brands that offer a variety of convenient, innovative, great-tasting, better-for-you snacks and meal replacements and other product offerings.
Our Vision and Mission Our vision is to lead the nutritional snacking movement with trusted brands that offer a variety of convenient, innovative, great-tasting, better-for-you snacks and meal replacements and other product offerings. Our mission is to empower healthy lives through smart and satisfying nutrition.
Our management team’s deep expertise and proven record of accomplishment in managing brands and operating packaged food businesses is a key driver of our success and positions Simply Good Foods as an attractive vehicle for future long-term growth within the nutritional snacking space. 7 Our Strategies Leverage platform to expand in attractive food and snacking categories .
Our management team’s deep expertise and proven record of accomplishment in managing brands and operating packaged food businesses is a key driver of our success and we believe positions Simply Good Foods as an attractive vehicle for future long-term growth within the nutritional snacking space.
In addition, during fiscal year 2022, we obtained ISO 22000 certification for our U.S. operations. International . Our products are also sold outside North America. Our top international sales are in Australia and New Zealand. For the fifty-two weeks ended August 27, 2022, international net sales represented approximately 2.9% of total net sales.
We hold an ISO 22000 certification for our U.S. operations, which we first obtained during fiscal year 2022. International . Our products are also sold outside North America. Our top international sales are in Australia and New Zealand. For the fifty-two weeks ended August 26, 2023, international net sales represented approximately 2.7% of total net sales.
Our identified branded competitors include, but are not limited to, CLIF Bar, KIND bars, Special K, Boost, Slimfast, Muscle Milk, ONE bar, Pure Protein, Premier Nutrition and think!.
Our identified branded competitors include, but are not limited to, CLIF Bar, KIND bars, Boost, Premier Protein, Core Power, Fairlife, Muscle Milk, ONE bar, Pure Protein, Slimfast, and think!.
The Quest Challenge grant was awarded following a competitive process in which applicants expressed their current philanthropic work and what they aim to achieve if they received the grant.
The Quest for Impact grants were awarded following a competitive process in which applicants expressed their current philanthropic work and what they aim to achieve if they received the grant.
We recognize the importance of balance in our employees’ lives to their overall wellbeing, so we offer our employees time off benefits described above to recharge, ten company-paid holidays per year, flexible remote workdays every Monday and Friday, and paid parental leave.
We recognize the importance of balance in our employees’ lives to their overall wellbeing, so we offer our employees time off benefits described above to recharge, ten company-paid holidays per year, flexible remote workdays every Monday and Friday, and paid parental leave. Advancing Health, Nutrition and Wellbeing. Our mission is to empower healthy lives through smart and satisfying nutrition.
In late 2021, we launched The Quest Challenge, a grant program for individuals who are making a difference in their community in support of health and wellness. In our inaugural year, we provided four separate $20,000 grants.
In late 2021, we launched Quest for Impact, formerly known as The Quest Challenge, a grant program for individuals who are making a difference in their community in support of health and wellness. In 2023, we provided four separate $20,000 grants.
We pride ourselves on knowing our consumers and developing products that meet their needs. Providing variety in snacking options to our consumers is an important strategy in our product innovation. New flavors, textures and snacking formats are important to meeting consumer needs.
We pride ourselves on knowing our consumers and developing products that meet their needs. Providing variety in snacking options to our consumers is an important strategy in our product innovation. New flavors, textures and snacking formats are important to meeting consumer needs. We believe an important component of meeting consumers’ nutritional needs is a focus on evolving current products.
For both the Atkins and the Quest brands, we have an active and growing digital and social presence, using a comprehensive approach of search, banner, and search engine optimization efforts. We are a leader in social media, with a top-tier presence on Facebook, Instagram, Pinterest, Twitter and YouTube.
For both the Quest and Atkins brands, we have an active and growing digital and social presence, using a comprehensive approach of search, banner, and search engine optimization efforts. We are a leader in social media, with an evolving social media presence on major channels such as Facebook, Instagram, Pinterest, X (formerly known as Twitter) and YouTube.
We competitively bid with major suppliers to source competitively priced, quality ingredients and packaging that meet our standards. For certain ingredients we establish direct purchasing agreements with suppliers, under which our contract manufacturers source ingredients to produce finished products. We also actively manage the cost of most of our packaging supplies, such as corrugate, film, and tetra caps and cartons.
For certain ingredients we establish direct purchasing agreements with suppliers, under which our contract manufacturers source ingredients to produce finished products. We also actively manage the cost of most of our packaging supplies, such as corrugate, film, and cartons.
The Company’s nutritious snacking platform consists of brands that specialize in providing products for consumers that follow certain nutritional philosophies and health-and-wellness trends: Atkins for those following a low-carb lifestyle or seeking to lose weight and Quest for consumers seeking a variety of protein-rich foods and beverages that also limit sugars and simple carbs.
Our nutritious snacking platform consists of brands that specialize in providing products for consumers that follow certain nutritional philosophies and health-and-wellness trends: Quest for consumers seeking a variety of protein-rich foods and beverages that also limit sugars and simple carbohydrates and Atkins for those following a low-carbohydrate lifestyle or seeking to manage weight or blood sugar levels.
Our principal executive offices are located at 1225 17 th Street, Suite 1000, Denver, Colorado, 80202. Our telephone number is (303) 633-2840. We maintain a web site at www.thesimplygoodfoodscompany.com .
This transaction is referred to as the “Quest Acquisition.” Our principal executive offices are located at 1225 17 th Street, Suite 1000, Denver, Colorado, 80202. Our telephone number is (303) 633-2840. We maintain a web site at www.thesimplygoodfoodscompany.com .
In the fifty-two weeks ended August 27, 2022, approximately 88% of Atkins’ gross sales in the U.S. and approximately 75% of Quest’s gross sales in the U.S. were through the mass retailer, grocery and convenience store distribution channels.
In the fifty-two weeks ended August 26, 2023, approximately 77% of Quest’s gross sales in the U.S. and approximately 86% of Atkins’ gross sales in the U.S. were through the mass retailer, grocery and convenience store distribution channels.
We believe that our ongoing efforts to educate consumers about the benefits of a lower carbohydrate lifestyle will further reinforce our brands.
We believe that our ongoing efforts to educate consumers about the benefits of our nutrition philosophy and lifestyle will further reinforce our brands.
For our Atkins brand, we use targeted broadcast and streaming television and print ads with a celebrity-based campaign that attempts to motivate potential programmatic weight loss consumers to try the Atkins approach to healthier eating and weight loss as these Atkins consumers are our most loyal, profitable and frequent purchasers.
For our Atkins brand, we use targeted broadcast and streaming television and print ads with a celebrity-based campaign that attempts to (i) motivate potential programmatic weight loss consumers to try the Atkins approach to healthier eating and weight loss as these Atkins consumers are our most loyal, profitable and frequent purchasers and (ii) broaden the reach of the Atkins brand to appeal to those consumers generally interested in low carbohydrate, low sugar nutrition.
We regularly ask our employees to respond to pulse surveys to gather feedback on topics ranging from organization changes to overall engagement and inclusion. This encourages open communication with employees and management, and tracks employee engagement over time.
We regularly ask our employees to respond to engagement surveys to gather feedback on topics ranging from teamwork to, growth, job satisfaction, engagement and inclusion. This encourages open communication with employees and management, and tracks employee engagement over time. Total Rewards.
Cookies . First launched in 2018, Quest’s cookie products are a convenient source of high-protein combined with low net carbs and low-sugar. Available in a variety of flavors including Chocolate Chip, Peanut Butter, Oatmeal Raisin and Snickerdoodle, Quest’s cookies typically contain about 15 grams of protein, 4 grams or less of net carbs and less than 1 gram of sugar.
Available in a variety of flavors including Chocolate Chip, Peanut Butter, Oatmeal Raisin and Snickerdoodle, Quest’s cookies typically contain about 15 grams of protein, 4 grams or less of net carbs and less than 1 gram of sugar.
Through this program, Simply Good Foods secured at least 500,000 meals for Feeding America. Additionally, we encourage and support our employees to give back to charities they are passionate about, and we match up to $100 of each employee’s donations. 16 Available Information We file annual, quarterly and current reports, proxy statements and other information with the SEC.
Through this program, Simply Good Foods secured at least 500,000 meals for Feeding America. Additionally, we encourage and support our employees to give back to charities they are passionate about, and we match up to $100 of each employee’s donations.
We intend to leverage our brand recognition to develop further the distribution channels through which we reach consumers, including through the continued expansion of the e-commerce channel. Continue our marketing efforts to increase household penetration. We intend to expand our marketing efforts to bring first-time buyers into the Atkins and Quest brand franchises.
We intend to leverage our brand recognition to develop further the distribution channels through which we reach consumers, including through the continued expansion of the e-commerce channel. Continue our marketing efforts and strategies to both increase household penetration and reach consumers beyond our core historic buyers.
Of that total, approximately 95% of our employees were in the United States, and the rest were in Canada, Europe, Australia, and New Zealand. 111 employees were engaged in marketing and sales, 81 were engaged in R&D, operations and quality, and 68 were engaged in administration. Of our United States employees, 20 employees were hourly and 227 were salaried.
Of that total, approximately 94% of our employees were in the United States, and the rest were in Canada, Europe, Australia, and New Zealand. 116 employees were engaged in marketing and sales, 85 were engaged in R&D, operations and quality, and 70 were engaged in administration. Of our United States employees, 23 employees were hourly and 233 were salaried.
Over time, we expect to continue seeking to identify and evaluate acquisition opportunities to complement our platform, and we see significant opportunity for growth and synergies in complementary adjacent snacking categories such as the “better-for-you” eating space. Innovate and expand the portfolio of product offerings to meet consumer demand for higher protein products and new product forms.
Over time, we expect to continue seeking to identify and evaluate acquisition opportunities to complement our platform, and we see significant opportunity for growth and synergies in complementary adjacent snacking categories such as the “better-for-you” eating space. Expand distribution in white space opportunities.
Our rich and creamy Atkins RTD shakes contain 10 to 15 grams of protein, as well as other important vitamins and minerals. Available in a variety of flavors, including cookies and crème, café caramel and creamy chocolate, Atkins’ RTD shakes are made with high quality ingredients and are designed to provide energy balance through the day.
Available in a variety of flavors, including cookies and crème, café caramel and creamy chocolate, Atkins’ RTD shakes are made with high quality ingredients and are designed to provide energy balance through the day. Our Atkins’ Plus RTD shakes contain 30 grams of protein, for our consumers seeking higher protein content. Confections.
Sales to our next two largest retailers, Amazon and Target, represented approximately 13% and 10% of consolidated sales in fiscal year 2022, respectively. No other customer represents more than 10% of sales.
Sales to our next largest retailer, Amazon, represented approximately 16% of consolidated sales in fiscal year 2023. No other customer represents more than 10% of sales.
In certain circumstances, these agencies must not only approve products, but also review the manufacturing processes and facilities used to produce these products before they can be marketed in the United States.
Under various statutes, these agencies prescribe the requirements and establish the standards for quality and safety and regulate marketing and advertising to consumers. In certain circumstances, these agencies must not only approve products, but also review the manufacturing processes and facilities used to produce these products before they can be marketed in the United States.
However, a number of companies in the nutritional snacking and weight management industry have greater financial resources, more comprehensive product lines, broader market presence, longer standing relationships with distributors and suppliers, longer operating histories, greater distribution capabilities, stronger brand recognition, and greater marketing resources than we have. Supply Chain We operate an asset-light business model.
We believe that we currently compete effectively with respect to each of these factors. However, a number of companies in the nutritional snacking industry have greater financial resources, more comprehensive product lines, broader market presence, longer standing relationships with distributors and suppliers, longer operating histories, greater distribution capabilities, stronger brand recognition, and greater marketing resources than we have.
While provided free of charge, we also offer over 1,600 protein-rich, low-carbohydrate and low-sugar recipes designed to help consumers achieve and maintain a healthy lifestyle, while still enjoying delicious food. Core Quest Products Our core Quest brand products consist of protein bars, cookies, chips and confections. Protein Bars.
While provided free of charge, we also offer over 1,600 protein-rich, low-carbohydrate and low-sugar recipes designed to help consumers achieve and maintain a healthy lifestyle, while still enjoying delicious food. Marketing, Advertising and Consumer Outreach Our marketing efforts are designed to increase consumer awareness of and demand for our products.
Simply Good Foods was formed in Delaware on March 30, 2017, to consummate the Business Combination, which occurred on July 7, 2017. As part of our strategy to become an industry leading snacking platform, in November 2019, we acquired Quest Nutrition, LLC.
The Simply Good Foods Company (“Simply Good Foods”) was formed on March 30, 2017, to acquire NCP-ATK Holdings, Inc. (“Atkins”), on July 7, 2017. As part of Simply Good Foods’ strategy to become an industry leading snacking platform, in November 2019, we acquired Quest Nutrition, LLC (“Quest”).
Our Atkins’ Plus RTD shakes contain 30 grams of protein, for our consumers seeking higher protein content. Confections. Our Atkins Endulge ® line, which is designed to satisfy consumers’ sweet cravings, and which we call Treats, consists of delicious desserts without all of the added sugar.
Our Atkins Endulge® line, which is designed to satisfy consumers’ sweet cravings, and which we call Treats, consists of delicious desserts without all of the added sugar.
For the second year, we participated in Walmart’s “Fight Hunger. Spark Change.” campaign. For each purchase of participating Simply Good Foods’ Atkins and Quest products at Walmart from April 18 – May 15, 2022, we donated the monetary equivalent of at least one meal to Feeding America.
We will continue to follow the progress of our past recipients and their effect on their communities. For the third year, we participated in Walmart’s “Fight Hunger. Spark Change.” campaign. For each purchase of participating Simply Good Foods’ Atkins and Quest products at Walmart during the campaign, we donated the monetary equivalent of at least one meal to Feeding America.
Recently launched confections include full-size and mini peanut butter cups and “fudgey” brownie and “gooey” caramel candy bites sold in a variety of packaging. The full-size peanut butter cups feature a nutrition profile for two cups of 11 grams of protein, 1 gram of net carbs, less than 1 gram of sugar and 4 grams of fiber.
The full-size peanut butter cups feature a nutrition profile for two cups of 11 grams of protein, 1 gram of net carbs, less than 1 gram of sugar and 4 grams of fiber.
Our mission is to empower healthy lives through smart and satisfying nutrition. 8 Our Products Core Atkins Products Our core Atkins brand products consist of protein bars, RTD shakes, confections, cookies, and chips. Protein Bars. To keep on-the-go consumers energized and fueled, our Atkins bars offer a convenient and effective solution, providing consumers with protein, fiber and a delicious taste.
Our Products Core Quest Products Our core Quest brand products consist of protein bars, cookies, salty snacks and confections. Protein Bars. To keep on-the-go consumers energized and fueled, our Quest bars offer a convenient and effective solution, providing consumers with protein, fiber and a delicious taste.
The website operations of such third parties may be affected by reliance on other third-party hardware and software providers, technology changes, risks related to the failure of computer systems through which these website operations are conducted, telecommunications failures, data security breaches and similar disruptions.
The website operations of our third parties may be affected by reliance on other third-party hardware and software providers, technology changes, risks related to the failure of computer systems through which these website operations are conducted, telecommunications failures, data security breaches and similar disruptions. 11 Segments During the fifty-two weeks ended August 27, 2022, we substantially completed our efforts to fully integrate our operations and organization structure after the Quest Acquisition.
We have instituted controls, including information technology governance controls that are intended to protect our computer systems and our information technology systems and networks. We also have business continuity plans that attempt to anticipate and mitigate failures.
We have instituted controls, including information technology governance controls that are intended to protect our computer systems and our information technology systems and networks. We also have business continuity plans that attempt to anticipate and mitigate failures. However, we cannot control or prevent every potential technology failure, adverse environmental event, third-party service interruption or cybersecurity risk.
However, we cannot control or prevent every potential technology failure, adverse environmental event, third-party service interruption or cybersecurity risk. 12 We increasingly rely on cloud computing and other technologies that result in third parties holding significant amounts of customer, consumer or employee information on our behalf.
We increasingly rely on cloud computing and other technologies that result in third parties holding significant amounts of customer, consumer or employee information on our behalf.
We also designed our organizational structure to support entity-wide business functions across brands, products, customers, and geographic regions. Additionally, our chief operating decision maker reviews operating results and forecasts at the consolidated level. As a result, we determined our operations are organized into one, consolidated operating segment and reportable segment.
We aligned the nature of our production processes and the methods used to distribute products to customers for the Atkins® and Quest® brands. We also designed our organizational structure to support entity-wide business functions across brands, products, customers, and geographic regions. Additionally, our chief operating decision maker reviews operating results and forecasts at the consolidated level.
Atkins offers two main types of bars: Atkins Meal Bars and Atkins Snack Bars. Atkins Meal Bars contain 13 to 17 grams of protein and are available in more than 10 different flavors. Atkins Snack Bars contain 7 to 13 grams of protein, with 2 to 4 grams of net carbs, and are available in 15 different varieties. RTD Shakes.
Atkins Snack Bars contain 7 to 13 grams of protein, with 2 to 4 grams of net carbs, and are available in 15 different varieties. RTD Shakes. Our rich and creamy Atkins RTD shakes contain 10 to 15 grams of protein, as well as other important vitamins and minerals.
Management believes the fragmented snacking category presents an opportunity for consolidation and the opportunity to build, through disciplined acquisitions, a leading platform in the nutritional snacking space. As a leader in nutritious snacking, we believe we have the unique capability to leverage our operating platform, product innovation expertise and customer relationships to expand beyond the Atkins and Quest brands.
As a leader in nutritious snacking, we believe we have the unique capability to leverage our operating platform, product innovation expertise and customer relationships to expand beyond our current brands.
These initiatives include the following, among others: • We hired a third-party DE&I consultant to survey our employees and provide guidance and best practice inputs to our management and the Corporate Responsibility & Sustainability Committee, as we continue to make progress on our DE&I efforts. • During fiscal year 2022, we established a Diversity, Equity, Inclusion and Belonging Council consisting of mid-level and senior leaders so our DE&I efforts are informed and led by a cross section of our leaders.
These initiatives include the following, among others: • In 2022, we established a Diversity, Equity, Inclusion and Belonging Council consisting of mid-level and senior leaders so our DE&I efforts are informed and led by a cross section of our leaders.
Chips . Quest’s protein chips, including the tortilla-style chips launched in spring 2018, quickly became a high-selling product offering an attractive nutrition profile when compared to conventional chip products.
Quest also offers soft baked frosted cookies containing about 5 grams of protein, 1 grams of net carbs and less than 1 gram of sugar. Salty Snacks . Quest’s protein chips, including the tortilla-style chips launched in spring 2018, quickly became a high-selling product offering an attractive nutrition profile when compared to conventional chip products.
The candy bites feature a nutrition profile of 5 grams of protein, 1 gram of net carbs, less than 1 gram of sugar, and candy bars feature 4 grams of fiber to 12 grams of protein, 3 grams of net carbs, 1 gram of sugar and 9 grams of fiber. 9 Marketing, Advertising and Consumer Outreach Our marketing efforts are designed to increase consumer awareness of and demand for our products.
The candy bars feature a nutrition profile of 12 grams of protein, 3 to 4 grams of net carbs, about 1 gram of sugar and about 9 grams of fiber.
Female and Minority Representation Female Minority 1 All Employees 55% 32% All People-leaders 43% 19% Director-level 49% 15% VP-level 31% 13% Executive Leadership Team 23% 8% Board of Directors 18% 9% 1 Minority representation includes the percent of United States employees who identify as Black or African American, Asian, Hispanic, Native American, or two or more races.
This information is also reviewed by our Board of Directors about the representation of women and minorities as a percentage of our employees at various levels of management and our Board of Directors, as of August 26, 2023. 13 Female and Minority Representation Female Minority 1 All Employees 56% 35% All People-leaders 48% 26% Director-level 55% 25% VP-level 26% 16% Executive Leadership Team 30% 10% Board of Directors 18% 9% 1 Minority representation includes the percent of United States employees who identify as Black or African American, Asian, Hispanic, Native American, or two or more races.
Federal Trade Commission (“FTC”), the U.S. Food and Drug Administration (“FDA”), the U.S. Environmental Protection Agency, and the Occupational Safety and Health Administration, in addition to similar state and local agencies. Under various statutes, these agencies prescribe the requirements and establish the standards for quality and safety and regulate marketing and advertising to consumers.
In the United States, the federal agencies governing the manufacture, distribution and advertising of products include, among others, the U.S. Federal Trade Commission (“FTC”), the U.S. Food and Drug Administration (“FDA”), the U.S. Environmental Protection Agency, and the Occupational Safety and Health Administration, in addition to similar state and local agencies.
Regulation and Compliance Along with contract manufacturers, brokers, distributors, ingredients and packaging suppliers, Simply Good Foods is primarily subject to laws and regulations in the United States promulgated by federal, state and local government authorities. In the United States, the federal agencies governing the manufacture, distribution and advertising of products include, among others, the U.S.
As a result, we determined our operations are appropriately still organized into one, consolidated operating segment and reportable segment. Regulation and Compliance Along with contract manufacturers, brokers, distributors, ingredients and packaging suppliers, Simply Good Foods is primarily subject to laws and regulations in the United States promulgated by federal, state and local government authorities.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAlthough we require our contract manufacturers to be compliant with regulatory requirements, we do not have direct control over such facilities. Failure of our contract manufacturers to comply with applicable regulation could have a material and adverse effect on our ability to sell our products to our customers and our results of operations.
Biggest changeWe must rely on the contract manufacturers we engage to produce our products to maintain compliance with applicable regulatory requirements. Although we require our contract manufacturers to be compliant with regulatory requirements, we do not have direct control over such facilities.
The COVID-19 pandemic situation continues to remain dynamic and subject to rapid and possibly material change, including but not limited to changes that may materially affect the operations of our customers and supply chain partners in the future, which ultimately could cause material negative effects on our business and results of operations.
The COVID-19 pandemic 19 situation continues to remain dynamic and subject to rapid and possibly material change, including but not limited to changes that may materially affect the operations of our customers and supply chain partners in the future, which ultimately could cause material negative effects on our business and results of operations.
If the security and information systems that we or our outsourced third-party providers use to store or process such information are compromised or if we, or such third parties, otherwise fail to comply with applicable laws and regulations, we could face litigation and the imposition of penalties that could adversely affect our financial performance.
If the security and information systems we or our outsourced third-party providers use to store or process such information are compromised or if we, or such third parties, otherwise fail to comply with applicable laws and regulations, we could face litigation and the imposition of penalties that could adversely affect our financial performance.
The FDA has not defined nutrient content claims regarding low-carbohydrates, but has not objected to using net carbohydrate information on food labels if the label adequately explains how the term is used so it would not be false or misleading to consumers.
The FDA has not defined nutrient content claims regarding low-carbohydrates, but it has not objected to using net carbohydrate information on food labels if the label adequately explains how the term is used so it would not be false or misleading to consumers.
The occurrence of, or failure to remediate, the material weakness we have identified or any other material weakness could result in our failure to maintain compliance with legal requirements, including Section 404 of the Sarbanes-Oxley Act and rules regarding timely filing of periodic reports, in addition to applicable stock exchange listing requirements, could cause investors to lose confidence in our financial reporting and could have an adverse effect on our the market price of our common stock.
The occurrence of, or failure to remediate, any material weakness we have identified or any other material weakness could result in our failure to maintain compliance with legal requirements, including Section 404 of the Sarbanes-Oxley Act and rules regarding timely filing of periodic reports, in addition to applicable stock exchange listing requirements, could cause investors to lose confidence in our financial reporting and could have an adverse effect on our the market price of our common stock.
These provisions include: • no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • the right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death, or removal of a director in certain circumstances, which prevents stockholders from filling vacancies on our board of directors; • the ability of our board of directors to determine whether to issue shares of our preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; 33 • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • a prohibition on stockholders calling a special meeting, which forces stockholder action to be taken at an annual meeting of our stockholders or at a special meeting of our stockholders called by the chairman of the board or the chief executive officer pursuant to a resolution adopted by a majority of the board of directors; • the requirement that a meeting of stockholders may be called only by the board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; • providing that directors may be removed prior to the expiration of their terms by stockholders only for cause and upon the affirmative vote of a majority of the voting power of all outstanding shares of the combined company; and, • advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of the Company.
These provisions include: • no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • the right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death, or removal of a director in certain circumstances, which prevents stockholders from filling vacancies on our board of directors; • the ability of our board of directors to determine whether to issue shares of our preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • a prohibition on stockholders calling a special meeting, which forces stockholder action to be taken at an annual meeting of our stockholders or at a special meeting of our stockholders called by the chairman of the board or the chief executive officer pursuant to a resolution adopted by a majority of the board of directors; • the requirement that a meeting of stockholders may be called only by the board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; • providing that directors may be removed prior to the expiration of their terms by stockholders only for cause and upon the affirmative vote of a majority of the voting power of all outstanding shares of the combined company; and, • advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of the Company.
Acquisitions involve numerous risks and uncertainties, including intense competition for suitable acquisition targets, which could increase target prices and/or materially and adversely affect our ability to consummate deals on favorable terms, the potential unavailability of financial resources necessary to consummate acquisitions, the risk we improperly value and price a target, the potential inability to identify all of the risks and liabilities inherent in a target company or assets notwithstanding our diligence efforts, the diversion of management’s attention from the day-to-day operations of our business and additional strain on our existing personnel, increased leverage resulting from the additional debt financing that may be required to complete an acquisition, dilution of our net current book value per share if we issue additional equity securities to finance an acquisition, difficulties in identifying suitable acquisition targets or in completing any transactions identified on sufficiently favorable terms and the need to obtain regulatory or other governmental approvals that may be necessary to complete acquisitions.
Acquisitions involve numerous risks and uncertainties, including intense competition for suitable acquisition targets, which could increase target prices and/or materially and adversely affect our ability to consummate deals on favorable terms, the potential unavailability of financial resources necessary to consummate acquisitions, the risk we improperly value and price a target, the potential inability to identify all of the risks and liabilities inherent in a target company or assets notwithstanding our diligence efforts, the diversion of management’s attention from the day-to-day operations of our business and additional strain on our existing personnel, increased leverage resulting from the additional debt financing that may be required to complete an acquisition, dilution of our net current book value per share if we issue additional equity securities to finance an acquisition, difficulties in identifying suitable acquisition targets or in 23 completing any transactions identified on sufficiently favorable terms and the need to obtain regulatory or other governmental approvals that may be necessary to complete acquisitions.
Such events include problems with our suppliers’ businesses, finances, labor relations, sustainability concerns, evolving applicable environmental regulations, ability to import core ingredients, delays in imported core ingredients being processed through local customs, costs, production, insurance, reputation and weather conditions during growing, harvesting or shipping, including flood, drought, frost and earthquakes, man-made disasters or other catastrophic occurrences, and geopolitical events such as the conflict between Ukraine and Russia.
Such events include problems with our suppliers’ businesses, finances, labor relations, sustainability concerns, evolving applicable environmental regulations, ability to import core ingredients, delays in imported core ingredients being processed through local customs, costs, production, insurance, reputation and weather conditions during growing, harvesting or shipping, including flood, drought, frost and earthquakes, man-made disasters or other catastrophic occurrences, and geopolitical events such as the continuing conflict between Ukraine and Russia.
Our ability to expand successfully our nutritional snacking brands and other growth strategies depends on, among other things, our ability to identify, and successfully cater to, new demographics and consumer trends, develop new and innovative products, identify and acquire additional product lines and businesses, secure shelf space in grocery stores, wholesale clubs and other retailers, increase consumer awareness of our brands, enter into distribution and other strategic arrangements with third-party retailers and other potential distributors of our products, and compete with numerous other companies and products.
Our ability to expand successfully our nutritional snacking brands and other growth strategies depends on, among other things, our ability to identify, and successfully cater to, new demographics and consumer trends, develop new and innovative products, identify and acquire additional product lines and businesses, secure shelf space in grocery stores, wholesale clubs and other retailers, increase consumer awareness of our 17 brands, enter into distribution and other strategic arrangements with third-party retailers and other potential distributors of our products, and compete with numerous other companies and products.
If any of these manufacturers: • experience adverse effects on their businesses, including an inability to fulfill their labor or other human capital needs; • cannot continue manufacturing our products at required levels, on a timely basis, or at all; or • choose to cancel or not renew our contract with them to manufacture our products; 24 we may be forced to seek other manufacturers.
If any of these manufacturers: • experience adverse effects on their businesses, including an inability to fulfill their labor or other human capital needs; • cannot continue manufacturing our products at required levels, on a timely basis, or at all; or • choose to cancel or not renew our contract with them to manufacture our products; we may be forced to seek other manufacturers.
If our information technology systems fail and our redundant systems or disaster recovery plans are not adequate to address such failures, or if our business interruption or cyber-security insurance does not sufficiently compensate us for any losses that we may incur, our revenue and profits could be reduced, and the reputation of our brand and our business could be materially adversely affected.
If our information technology systems fail and our redundant systems or disaster recovery plans are not adequate to address such failures, or if our business interruption or cyber-security insurance does not sufficiently compensate us for any losses we may incur, our revenue and profits could be reduced, and the reputation of our brand and our business could be materially adversely affected.
The material weakness will not be considered remediated until a sustained period of time has passed to allow management to test the design and operational effectiveness of the corrective actions. We may identify new material weaknesses in the future, which could limit our ability to prevent or detect a material misstatement of our annual or interim financial statements.
A material weakness will not be considered remediated until a sustained period of time has passed to allow management to test the design and operational effectiveness of the corrective actions. We may identify material weaknesses in the future, which could limit our ability to prevent or detect a material misstatement of our annual or interim financial statements.
If we do not continually enhance our brand recognition, increase distribution of our products, attract new consumers to our brands and introduce new and innovative products, either on a timely basis or at all, our business may suffer. The nutritional snacking industry is subject to rapid and frequent changes in consumer demands.
If we do not continually enhance our brand recognition, maintain or increase distribution of our products, attract new consumers to our brands and introduce new and innovative products, either on a timely basis or at all, our business may suffer. The nutritional snacking industry is subject to rapid and frequent changes in consumer demands.
Our results of operations depend on, among other things, our ability to maintain and increase sales volume with our existing distributors and retailers, to attract new consumers and to provide products that appeal to consumers at prices they are willing and able to pay. Prolonged unfavorable economic conditions may have an adverse effect on our sales and profitability.
Our results of operations depend on, among other things, our ability to maintain and increase sales volume with our existing distributors and retailers, to attract new consumers and to provide products that appeal to 30 consumers at prices they are willing and able to pay. Prolonged unfavorable economic conditions may have an adverse effect on our sales and profitability.
There can be no assurance that Walmart, Amazon, Target or our other significant customers will continue to purchase our products in the same quantities or on the same terms as in the past, particularly as increasingly powerful retailers continue to demand lower pricing. Our retailers rarely provide us with firm, long- or short-term volume purchase commitments.
There can be no assurance that Walmart or Amazon or our other significant customers will continue to purchase our products in the same quantities or on the same terms as in the past, particularly as increasingly powerful retailers continue to demand lower pricing. Our retailers rarely provide us with firm, long- or short-term volume purchase commitments.
In addition, if we fail to adhere to such laws and regulations, we could be subject to regulatory investigations, civil or criminal sanctions, and class action litigation, which has increased in the industry in recent years. 29 Litigation or legal proceedings could expose us to significant liabilities and have a negative effect on our reputation.
In addition, if we fail to adhere to such laws and regulations, we could be subject to regulatory investigations, civil or criminal sanctions, and class action litigation, which has increased in the industry in recent years. Litigation or legal proceedings could expose us to significant liabilities and have a negative effect on our reputation.
In addition, remediation of any problems with our systems could result in significant, unplanned expenses. We have instituted controls, including information system governance controls that are intended to protect our computer systems and our information technology systems and networks. We also have business continuity plans that attempt to anticipate and mitigate failures.
In addition, remediation of any problems with our systems could result in significant, unplanned expenses. We have instituted controls, including information system governance controls intended to protect our computer systems and our information technology systems and networks. We also have business continuity plans that attempt to anticipate and mitigate failures.
Future core ingredient prices may be affected by new laws or regulations, tariffs, suppliers’ allocations to other purchasers, interruptions in production by suppliers, natural disasters, volatility in the price of crude oil and related petrochemical products and changes in exchange rates.
Future core ingredient and packaging prices may be affected by new laws or regulations, tariffs, suppliers’ allocations to other purchasers, interruptions in production by suppliers, natural disasters, volatility in the price of crude oil and related petrochemical products and changes in exchange rates.
As a result, our interest expense may increase, our ability to refinance some or all of our existing indebtedness may be affected, and our available cash flow may be adversely affected. 30 We may need additional capital in the future, and it may not be available on acceptable terms or at all.
As a result, our interest expense may increase, our ability to refinance some or all of our existing indebtedness may be affected, and our available cash flow may be adversely affected. We may need additional capital in the future, and it may not be available on acceptable terms or at all.
We periodically update our operations and financial systems, procedures and controls; however; we still rely on certain manual processes and procedures that may not scale proportionately with our business growth. Our systems will continue to require automation, modifications and improvements to respond to current and future changes in our business.
We periodically update our operations and financial systems, procedures and controls; however; we still rely on certain manual processes and procedures that may not scale proportionately with our business growth. Our systems will continue to require automation, modifications and improvements to 28 respond to current and future changes in our business.
Customs and Border Protection and other local governments where are contract manufacturers are located; • employment laws; • privacy laws; • laws regulating the price we may charge for our products; • regulatory requirements from any required disclosures related to climate change; and • farming and environmental laws.
Customs and Border Protection and other local governments where are contract manufacturers are located; • employment laws; • privacy laws; • laws regulating the price we may charge for our products; • regulatory requirements from any required disclosures related to climate change; and • farming, transportation and environmental laws.
SOFR is observed and backward looking, which stands in contrast with the London Inter-Bank Offered Rate (“LIBOR”) under the previous methodology, which is an estimated forward-looking rate and relies, to some degree, on the expert judgment of submitting panel members.
SOFR is observed and backward looking, which stands in contrast with the London Inter-Bank Offered Rate (“LIBOR”) under 27 the previous methodology, which is an estimated forward-looking rate and relies, to some degree, on the expert judgment of submitting panel members.
Department of Treasury, Office of Foreign Assets Control (“OFAC”) and the European Union (“EU”); • laws relating to export, re-export, transfer, tariffs and import controls, including the Export Administration Regulations, the EU Dual Use Regulation and the customs and import laws administered by the U.S.
Department of Treasury, Office of Foreign Assets Control (“OFAC”) and the European Union (“EU”); 26 • laws relating to export, re-export, transfer, tariffs and import controls, including the Export Administration Regulations, the EU Dual Use Regulation and the customs and import laws administered by the U.S.
If we fail to implement our growth strategies successfully, timely, or at all, our ability to increase our revenue and operating profits could be materially and adversely affected. Our future success depends, largely, on our ability to implement our growth strategies effectively. However, we may fail to accomplish this.
If we fail to implement our growth strategies successfully, timely, or at all, our ability to increase our revenue and operating profits could be materially and adversely affected. Our success depends, largely, on our ability to implement our growth strategies effectively. However, we may fail to accomplish this.
The failure of these systems to operate effectively, whether from maintenance problems, upgrading or transitioning to new platforms, or a breach in security of these systems, could result in interruptions or delays in our operations, reduce efficiency or negatively affect our operations.
The failure of these systems to operate effectively, whether from maintenance problems, upgrading or transitioning to new 24 platforms, or a breach in security of these systems, could result in interruptions or delays in our operations, reduce efficiency or negatively affect our operations.
If we cannot mitigate the effect of supply chain constraints and inflationary pressure through price increases or cost saving measures, our results of operations and financial condition could be negatively affected.
If we cannot mitigate the effect of supply chain constraints and inflationary pressure through price increases or cost saving measures, our results of operations and financial condition could be further negatively affected.
For more information on the effects of supply chain cost increases results of operations during fiscal year 2022, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-K. Certain of our core ingredient contracts have minimum volume commitments that could require purchases without matching revenue during weaker sales periods.
For more information on the effects of supply chain cost increases on our results of operations during fiscal year 2023, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-K. Certain of our core ingredient contracts have minimum volume commitments that could require purchases without matching revenue during weaker sales periods.
We may also be adversely affected by news or other negative publicity, regardless of accuracy, regarding other aspects of our business, such as public health concerns, the perception of our environmental stewardship and the effects our business has on the environment, illness, safety, security breaches of confidential consumer or employee information, employee related claims relating to alleged employment discrimination, health care and benefit issues or government or industry findings about our retailers, distributors, manufacturers or others across the industry supply chain.
We may also be adversely affected by news or other negative publicity, regardless of accuracy, regarding other aspects of our business, such as: • public health concerns, illness or safety; • the perception of our environmental stewardship and the effects our business has on the environment; 18 • security breaches of confidential consumer or employee information; • employee related claims relating to alleged employment discrimination, health care and benefit issues; or • government or industry findings about or the financial stability of our retailers, distributors, manufacturers or others across our supply chain.
Products or methods of eating once considered healthy may become disfavored by consumers, scientifically disproven or no longer be perceived as healthy.
Products, ingredients, or methods of eating once considered healthy may become disfavored by consumers, scientifically disproven or no longer be perceived as healthy.
Negative views regarding our products and the efficacy of the Atkins or Quest eating approaches have been posted on various social media platforms, may continue to be posted in the future, and are out of our control. Regardless of their accuracy or authenticity, such information and views may be adverse to our interests and may harm our reputation and brands.
Negative views regarding our products and the efficacy of our eating approaches have been posted on various social media platforms, may continue to be posted in the future, and are out of our control. Regardless of their accuracy or authenticity, such information and views may be adverse to our interests and may harm our reputation and brands.
In addition, because we rely on few contract manufacturers for a majority of our manufacturing needs and because our distribution warehouses are all in a similar geographic location, adverse weather conditions could affect the ability for those third-party operators to manufacture, store or move our products.
In addition, because we rely on few contract manufacturers for most of our manufacturing needs and because our distribution warehouses are all in a similar geographic location, adverse weather conditions could affect the ability for those third-party operators to manufacture, store or move our products.
Regulatory Risks and Litigation Risks All of our products must comply with federal, state and local regulations. Any non-compliance with the FDA, USDA or other applicable regulations could harm our business. Our products must comply with various rules and regulations, including those regarding product manufacturing, food safety, required testing and appropriate labeling of our products.
Regulatory Risks and Litigation Risks All of our products must comply with federal, state and local regulations. Any non-compliance with the FDA or other applicable regulations could harm our business. 25 Our products must comply with various rules and regulations, including those regarding product manufacturing, food safety, required testing and appropriate labeling of our products.
Accordingly, we may not succeed in timely developing, introducing or marketing any new or enhanced products. If we cannot commercialize new products, our revenue may not grow as expected, which would materially and adversely affect our business, financial condition and results of operations.
Accordingly, we may fail in timely developing, introducing or marketing any new or enhanced products. If we cannot commercialize new products, our revenue may not grow as expected, which would materially and adversely affect our business, financial condition and results of operations.
Whether or not a product liability claim or lawsuit is unsuccessful or is not fully pursued, the negative publicity surrounding any assertion that our products caused illness or injury could adversely affect our reputation with existing and potential consumers and our corporate and brand image.
Whether or not a claim or lawsuit is unsuccessful or is not fully pursued, the negative publicity surrounding any assertion that our products caused illness or injury could adversely affect our reputation with existing and potential consumers and our corporate and brand image.
If supplies of core ingredients and packaging available to us are reduced, we may not be able to find enough supplemental supply sources on favorable terms, which could materially and adversely affect our business, financial condition and results of operations.
If supplies of core ingredients and packaging available to us are reduced, we may not find enough supplemental supply sources on favorable terms, which could materially and adversely affect our business, financial condition and results of operations.
Our reputation as a brand or as an employer could also be adversely affected by these types of security breaches or regulatory violations, which could impair our ability to attract and retain qualified employees. A significant number of states require that consumers be notified if a security breach results in disclosing their personal financial account or other information.
Our reputation as a brand or as an employer could also be adversely affected by these types of security breaches or regulatory violations, which could impair our ability to attract and retain qualified employees. Many states require that consumers be notified if a security breach results in disclosing their personal financial account or other information.
In addition, a number of these weather conditions could become even more severe over time as a result of the effects of climate change. Competing manufacturers might be affected differently by weather conditions, natural disasters, and geopolitical events depending on the location of their sources of supplies and manufacturing or distribution facilities.
In addition, a number of these weather conditions could become even more severe over time because of the effects of climate change. Competing manufacturers might be affected differently by weather conditions, natural disasters, and geopolitical events depending on the location of their sources of supplies and manufacturing or distribution facilities.
Many social media platforms make available the content their subscribers and participants post, often without filters or checks on accuracy of the content posted. The opportunity for dissemination of information, including inaccurate information, is potentially limitless. Information about our business and/or products may be circulated on such platforms at any time.
Many social media platforms provide the content their subscribers and participants post, often without filters or checks on accuracy of the content posted. The opportunity for dissemination of information, including inaccurate information, is potentially limitless. Information about our business and/or products may be circulated on such platforms at any time.
Our ability to implement our innovation, advertising, display and promotion activities designed to maintain and increase our sales volumes on a timely basis may be negatively affected because of modifications to retailer shelf reset timing or retailer pullback on in-store display and promotional activities during the COVID-19 pandemic or similar situations.
Our ability to implement our innovation, advertising, display and promotion activities designed to maintain and increase our sales volumes on a timely basis may be negatively affected because of modifications to retailer shelf reset timing or retailer pullback on in-store display and promotional activities during pandemic or similar situations.
The core ingredients used in manufacturing our products include soy, nuts, dairy, protein, fiber and cocoa. We rely on a limited number of third-party suppliers to provide these core ingredients, a portion of which are international companies. There may be a limited market supply of any of these core ingredients.
The core ingredients used in manufacturing our products include nuts, protein and fiber. We rely on a limited number of third-party suppliers to provide these core ingredients, a portion of which are international companies. There may be a limited market supply of any of these core ingredients.
Our amended and restated certificate of incorporation provides that, to the extent allowed by law, the doctrine of “corporate opportunity” does not apply with respect to the directors, officers, employees or representatives of Conyers Park Sponsor, Centerview Capital and Centerview Partners and their respective affiliates.
Our amended and restated certificate of incorporation provides that, to the extent allowed by law, the doctrine of “corporate opportunity” does not apply with respect to the directors, officers, employees or representatives of Centerview Capital, Centerview Partners, our original sponsor, and their respective affiliates.
We may also not succeed in evolving our advertising and other efforts to appeal to our target consumers for both Atkins and Quest. If we cannot identify and capture new audiences and demographics for all our brands, our ability to integrate additional brands successfully will be adversely affected.
We may also not succeed in evolving our advertising and other efforts to appeal to our target consumers. If we cannot identify and capture new audiences and demographics for all our brands, our ability to integrate additional brands successfully will be adversely affected.
Disruptions at our distribution facilities or in our operations due to natural or man-made disasters, pandemics (such as COVID-19) or other disease outbreaks, fire, flooding, terrorism or other catastrophic events, system failure, labor shortages or disagreements or shipping problems may cause delays in the delivery of products to retailers and could materially and adversely affect our results of operations.
Disruptions at our distribution facilities or in our operations due to natural or man-made disasters, pandemics or other disease outbreaks, fire, flooding, terrorism or other catastrophic events, system failure, labor shortages or disagreements or shipping problems may cause delays in the delivery of products to retailers and could materially and adversely affect our results of operations.
Supply chain challenges and supply chain constraints relating to ingredients, freight and packaging, including cost inflation, have negatively affected our gross margins and profitability during fiscal year 2022 and may continue to have a negative effect on our future operating results and profitability.
Supply chain challenges and supply chain constraints relating to ingredients, freight and packaging, including cost 16 inflation, have negatively affected our gross margins and profitability during fiscal year 2023 and may continue to have a negative effect on our future operating results and profitability.
Our ability to successfully offer our products, grow our business and account for transactions in an appropriate and timely manner requires an effective planning and management process and certain other automated management and accounting systems. We recently implemented an integrated enterprise resource planning system and certain other automated management and accounting systems.
Our ability to successfully offer our products, grow our business and account for transactions in an appropriate and timely manner requires an effective planning and management process and certain other automated management and accounting systems. We have an integrated enterprise resource planning system and certain other automated management and accounting systems.
In addition, there is no guarantee a new manufacturing partner could accurately replicate the production process and taste profile of the existing products. In addition, from time to time we determine to select new contract manufacturers to replace existing manufacturers to produce our products.
In addition, there is no guarantee a new manufacturing partner could accurately replicate the production process and taste profile of the existing products. In addition, occasionally we determine to select new contract manufacturers to replace existing manufacturers to produce our products.
As a result of these possible outcomes we could incur increases in operating expenses and our results of operations could be materially and adversely affected. While we maintain insurance against losses related to unauthorized access to our systems, there can be no assurance our level of coverage will be sufficient to address the losses we sustain.
Because of these possible outcomes we could incur increases in operating expenses and our results of operations could be materially and adversely affected. While we maintain insurance against losses related to unauthorized access to our systems, there can be no assurance our level of coverage will be sufficient to address the losses we sustain.
For more information on the implementation of our price increases and the effects of supply chain cost increases on our profitability during fiscal year 2022, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-K. Furthermore, price increases generally result in volume losses, as consumers tend to purchase fewer units at higher price points.
For more information on the effects of supply chain cost increases on our profitability during fiscal year 2023, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-K. Furthermore, price increases generally cause volume losses, as consumers tend to purchase fewer units at higher price points.
These laws, rules and regulations could also make it more expensive for us to obtain director and officer liability insurance and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.
These laws, regulations and rules, including new compensation clawback rules, could also make it more expensive for us to obtain director and officer liability insurance and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.
Costs of ingredients and packaging are volatile and can fluctuate due to conditions difficult to predict, including global competition for resources, fluctuations in currency and exchange rates, weather conditions, the effects of climate change, natural or man-made disasters, consumer demand, geopolitical events, and changes in governmental trade and agricultural programs and environmental regulation.
Costs of ingredients and packaging are volatile and can fluctuate due to conditions difficult to predict, including global competition for resources, fluctuations in currency and exchange rates, weather conditions, the effects of climate change, natural or man-made disasters, consumer demand, geopolitical events, and changes in governmental trade and agricultural programs and environmental regulations affecting the production or manufacturing of ingredients and packaging.
If we or our third-party providers fail to maintain or protect our respective information technology systems and data integrity effectively, fail to implement new systems, update or expand existing systems, or fail to anticipate, plan for or manage significant disruptions to or compromises of systems involved in our operations, we could: • lose existing customers; • have difficulty preventing, detecting, and controlling fraud; • have disputes with customers, suppliers, distributors or others; • be subject to regulatory sanctions, including sanctions stemming from violations of the Health Insurance Portability and Accountability Act of 1996; • suffer reputational harm, and • incur unexpected costs to remediate any unauthorized access of our systems and implement protective measures against future attacks.
If we or our third-party providers fail to maintain or protect our respective information technology systems and data integrity effectively, fail to implement new systems, update or expand existing systems, fail to provide necessary privacy law disclosures or fail to anticipate, plan for or manage significant disruptions to or compromises of systems involved in our operations, we could: • lose existing customers; • have difficulty preventing, detecting, and controlling fraud; • have disputes with customers, suppliers, distributors or others; • be subject to regulatory sanctions, including sanctions stemming from violations of the Health Insurance Portability and Accountability Act of 1996 or other federal or state privacy laws; • suffer reputational harm, and • incur unexpected costs to remediate any unauthorized access of our systems and implement protective measures against future attacks.
In addition, if we recall certain products, including frozen foods or licensed products over which we may not have full quality control, the public perception of the quality of our food may be diminished.
In addition, if we recall certain products, including licensed products over which we may not have full quality control, the public perception of the quality of our food may be diminished.
Our success depends, in part, on our ability to anticipate the tastes and dietary habits of consumers and other consumer trends and to offer products with marketing messaging that appeal to their needs and preferences on a timely and affordable basis.
Our success depends, in part, on our ability to advance sound nutrition research and to anticipate the tastes and dietary habits of consumers and other consumer trends and to offer products with marketing messaging that appeal to their needs and preferences on a timely and affordable basis.
Risks Related to our Operating Model Ingredient and packaging costs are volatile and may rise significantly, which may negatively affect the profitability of our business. We negotiate the prices for large quantities of core ingredients, such as soy, nuts, dairy, protein, fiber and cocoa, and packaging materials. Several ingredients are manufactured outside of the United States.
Risks Related to our Operating Model Ingredient and packaging costs are volatile and may rise significantly, which may negatively affect the profitability of our business. We negotiate the prices for large quantities of core ingredients, such as nuts, protein, fiber and packaging materials. Several ingredients are farmed or manufactured outside of the United States.
Pandemics, epidemics or disease outbreaks, such as the novel coronavirus (“COVID-19”), have in the past and may in the future disrupt our business, including, among other things, consumption and trade patterns, our supply chain and production processes, each of which could materially affect our operations, liquidity, financial condition and results of operations.
Pandemics, epidemics or disease outbreaks, such as COVID, have in the past and may in the future disrupt our business, including, among other things, consumption and trade patterns, our supply chain and production processes, each of which could materially affect our operations, liquidity, financial condition and results of operations.
Consumer perceptions of the nutritional profile of our products and related eating practices may shift, and consumers may no longer perceive products with fewer carbohydrates, higher levels of protein, higher levels of fat and additional fiber as healthy or needed to achieve personal weight management, wellness, or fitness goals.
Consumer perceptions of the nutritional profile of our products and related eating practices may shift. Consumers may also no longer perceive products with fewer carbohydrates, higher levels of protein, higher levels of fat, or additional fiber or which contain alternative sweeteners as healthy or needed to achieve personal weight management, wellness, or fitness goals.
Most of our other customers pick-up their orders at our distribution centers and make their own arrangements for delivery to their fulfillment network. A small percentage of our customers are shipped certain products directly from a co-manufacturing location. We rely significantly on the orderly operation of our distribution centers and logistics providers.
Most of our other customers pick-up their orders at our distribution centers and arrange for delivery to their fulfillment network. A small percentage of our customers are shipped certain products directly from a co-manufacturing location. We rely significantly on the orderly operation of our distributions centers and logistics providers.
In particular, our operations are subject to U.S. and foreign anti-corruption and trade control laws and regulations, such as the FCPA or the Bribery Act, export controls and economic sanctions programs, including those administered by the OFAC and the EU.
In particular, our operations are subject to U.S. and foreign anti-corruption and trade control laws and regulations, such as the FCPA, export controls and economic sanctions programs, including those administered by the OFAC.
Our continued expansion outside the United States, including in developing countries, and our development of new partnerships and joint venture relationships worldwide, could increase the risk of FCPA, OFAC, Bribery Act or EU sanctions violations in the future.
Our continued expansion outside the United States, including in developing countries, and our development of new partnerships and joint venture relationships worldwide, could increase the risk of FCPA, OFAC or other sanctions violations in the future.
Except for limited information voluntarily submitted by users of our website, we typically do not collect or store consumer data or personal information. However, third-party providers, including our licensees, contract manufacturers, e-commerce contractors and third-party sellers may do so.
Except for limited information voluntarily submitted by users of our website, we typically do not collect or store consumer data or personal information, although we do share information to third-party providers to provide consumer advertising. However, third-party providers, including our licensees, contract manufacturers, e-commerce contractors and third-party sellers may do so.
Even though we are working to alleviate supply chain constraints through various measures, we cannot predict the effect of these constraints on the timing of revenue and operating costs of our business in the near future.
Even though we continue to work to alleviate supply chain constraints through various measures, we cannot predict the effect of these constraints on the timing of revenue and operating costs of our business in the near future.
We compete in this market against numerous multinational, regional and local companies principally based on our low-carb, low-sugar and protein-rich nutritional content, product taste and quality, our brand recognition and loyalty, marketing, advertising, price and the ability to satisfy specific consumer dietary needs.
We compete in this market against numerous multinational, regional and local companies principally based on our nutritional content, product taste and quality, our brand recognition and loyalty, marketing, advertising, price and the ability to satisfy specific consumer dietary needs.
Additionally, certain ingredients used in our products may become negatively perceived by consumers, resulting in reformulation of existing products to remove such ingredients, which may negatively affect the taste or other qualities of our products.
Additionally, certain ingredients used in our products may become negatively perceived by consumers for a variety of reasons, resulting in reformulation of existing products to remove such ingredients, which may negatively affect the taste or other qualities of our products.
Unattractive placement or pricing, including as a result of our recent price increases, may put our products at a disadvantage compared to those of our competitors.
Unattractive placement or pricing, including because of our recent price increases, may put our products at a disadvantage compared to those of our competitors.
Adverse messaging in the media, including social media, or within certain influencer communities, relating to the marketing of weight management products or programs may adversely affect the overall consumer impression of certain of our products, programs or brands, which may materially and adversely affect our business.
Adverse messaging in the media, including social media, or within certain influencer communities, relating to the marketing of nutritional snacking products or weight-related dietary programs may adversely affect the overall consumer impression of certain of our products, programs or brands, which may materially and adversely affect our business.
Besides remaining competitive through the quality of our products, consumer perceptions of the Atkins’ weight management approach and the effectiveness of a low-carb, low-sugar and protein-rich eating approach for both our Atkins and Quest brands must continue to be viewed favorably, or our business and reputation may be materially and adversely affected.
Besides remaining competitive through the quality of our products and consumer perceptions of the effectiveness of a low-carb, low-sugar and protein-rich eating approach, both our brands must continue to be viewed favorably, or our business and reputation may be materially and adversely affected.
In addition, p rolonged unfavorable economic conditions, including because of COVID-19 or similar outbreaks, endemics or pandemics, and any resulting recession or slowed economic growth, may have an adverse effect on our sales and profitability. If we cannot maintain or increase prices of our products to cover elevated input costs, our margins may decrease.
In addition, p rolonged unfavorable economic conditions, including because of recession or slowed economic growth, or public health outbreaks, endemics or pandemics, may have an adverse effect on our sales and profitability. If we cannot maintain or increase prices of our products to cover elevated input costs, our margins may decrease.
To respond to new and evolving consumer demands, achieve market acceptance and keep pace with new nutritional, weight management, technological and other developments, we must constantly introduce new and innovative products into the market, some of which may not be accepted by consumers, may be sent to market prematurely or may not be consistent with our quality and taste standards.
To respond to new and evolving consumer demands, achieve market acceptance and keep pace with new nutritional, scientific, technological and other developments, we must constantly introduce new and innovative products into the market, some of which may not be accepted by consumers, may be sent to market prematurely, or may contravene our taste or texture standards.
We operate mainly in North America and, therefore, are particularly susceptible to adverse regulations, economic climate, consumer trends, market fluctuations, including commodity price fluctuations or supply shortages of key ingredients, and other adverse events in North America.
Our geographic focus makes us particularly vulnerable to economic and other events and trends in North America. We operate mainly in North America and, therefore, are particularly susceptible to adverse regulations, economic climate, consumer trends, market fluctuations, including commodity price fluctuations or supply shortages of key ingredients, and other adverse events in North America.
Adverse and uncertain economic conditions, such as those caused by the inflationary environment experienced in fiscal year 2022 that is expected to continue in fiscal year 2023, geopolitical events and COVID-19, have, in the past affected, and, in the future, may affect distributor, retailer and consumer demand for our products.
Adverse and uncertain economic conditions, such as those caused by the inflationary environment first experienced in fiscal year 2022 and which continued in fiscal year 2023, geopolitical events and COVID-19, have, in the past affected, and, in the future, may affect distributor, retailer and consumer demand for our products.
Consequently, investors may need to rely on sales of their shares of common stock after the price has appreciated, which may never occur, as the only way to realize any future gains on their investment. Investors seeking cash dividends should not purchase our common stock.
Consequently, investors may need to rely on sales of their shares of common stock after the price has appreciated, which may never occur, as the only way to realize any future gains on their investment.
For example, negative third-party reports regarding the Atkins or Quest nutritional approach or the quality of our food, whether accurate or not, may adversely affect consumer perceptions, which could cause the value of our brands to suffer and adversely affect our business.
For example, negative third-party research or media reports on our nutritional approach, use of ingredients or the quality of our food, whether accurate or not, may adversely affect consumer perceptions, which could cause the value of our brands to suffer and adversely affect our business.
As of August 27, 2022, we had approximately $406.5 million in outstanding term loan indebtedness and a revolving credit facility with availability of up to $75 million with no amounts drawn on that revolving credit facility.
As of August 26, 2023, we had approximately $285 million in outstanding term loan indebtedness and a revolving credit facility with availability of up to $75 million with no amounts drawn on that revolving credit facility.
The sudden loss of key personnel or our failure to appropriately plan for any expected key executive succession, including for our president and chief executive officer whose employment agreement expires in July 2023, could materially and adversely affect our business and prospects, as we may not be able to find suitable individuals to replace them on a timely basis, if at all.
The sudden loss of key personnel or our failure to appropriately plan for any expected key executive succession could materially and adversely affect our business and prospects, as we may not be able to find suitable individuals to replace them on a timely basis, if at all.
In addition, if FDA or other regulations restrict us from labeling and marketing certain ingredients or product attributes, such as fiber or “net carb” count, we may not effectively reach our target demographics, promote what we believe to be the benefits of our products or communicate that our products are composed of what we consider to be low-carb, low-sugar and protein-rich ingredients. 28 We must rely on the contract manufacturers we engage to produce our products to maintain compliance with applicable regulatory requirements.
In addition, if FDA or other regulations restrict us from labeling and marketing certain ingredients or product attributes, such as fiber or “net carb” count, we may not effectively reach our target demographics, promote what we believe to be the benefits of our products or communicate that our products are composed of what we consider to be low-carb, low-sugar and protein-rich ingredients.
Approaches regarding weight management and healthy lifestyles are the subject of numerous studies and publications, often with differentiating views and opinions, some of which may be adverse to us. Conflicting scientific information on what constitutes good nutrition, diet fads or other weight loss trends may also materially and adversely affect our business.
Approaches regarding nutritional approaches and healthy lifestyles are the subject of numerous studies and publications, often with differentiating views and opinions, some of which may be adverse to us. Conflicting scientific information on what constitutes good nutrition, or the benefits of certain dietary approaches may also materially and adversely affect our business.
If complications arise, a particular facility is damaged or destroyed or if either our third-party logistics partners or our customers who transport their own orders to their fulfillment network are not able to meet their labor or other human capital needs for delivery drivers or other warehouse personnel, our ability to deliver inventory timely will be significantly impaired, which could materially and adversely affect our business as a result of lost consumer purchases at retail thereby negatively affecting our results of operations.
If complications arise, a particular facility is damaged or destroyed or if either our third-party logistics partners or our customers who transport their own orders to their fulfillment network cannot meet their labor or other human capital needs for delivery drivers or other warehouse personnel or if trucking regulations affect current trucking norms (such as a shift to electric vehicles), our ability to deliver inventory timely or cost effectively could be significantly impaired, which could materially and adversely affect our business because of lost consumer purchases at retail thereby negatively affecting our operations.
Any material upward movement in core ingredient pricing could negatively affect our margins if we cannot find efficiencies or pass these costs on to our consumers, or our sales if we are forced to increase our prices.
We do not use hedges for availability of any core ingredients. Any material upward movement in core ingredient or packaging pricing could negatively affect our margins if we cannot find efficiencies or pass these costs on to our consumers, or our sales if we are forced to increase our prices.
For example, the operations of several of our contract manufacturers were affected by the COVID-19 pandemic’s effect on the availability of labor. 18 Pandemics, epidemics or disease outbreaks may affect demand for our products because quarantines or other government restrictions on movement may cause erratic consumer purchase behavior.
For example, the operations of several of our contract manufacturers were affected at the height of the COVID-19 pandemic’s effect on the availability of labor. Pandemics, epidemics or disease outbreaks may affect demand for our products because quarantines or other government restrictions on movement may cause erratic consumer purchase behavior. Our business experienced these effects during fiscal year 2022.
If having our products available for consumer purchase through our retail customers is disrupted as a result of an inability to obtain ingredients or packaging, labor challenges at our logistics providers or our contract manufacturers, or if our customers experience delays in stocking our products in their locations, we will experience a reduction in sales at retail and our results of operations could be material and adversely affected.
If having our products available for consumer purchase through our retail customers is disrupted because of an inability to obtain ingredients or packaging, labor challenges at our logistics providers or our contract manufacturers, or if our customers experience delays in stocking our products in their locations, we will experience a reduction in sales at retail and our results of operations could be material and adversely affected. 21 We are subject to risks associated with protection of our trade secrets by our third-party contract manufacturers.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+2 added−1 removed2 unchanged
Biggest changeOn April 13, 2022, we announced that our Board of Directors had approved the addition of $50.0 million to our stock repurchase program, resulting in authorized stock repurchases of up to an aggregate of $100.0 million. As of August 27, 2022, approximately $38.0 million remained available under the stock repurchase program.
Biggest changeOn April 13, 2022 and October 21, 2022, we announced that our Board of Directors had approved the addition of $50.0 million and $50.0 million, respectively, to our stock repurchase program, resulting in authorized stock repurchases of up to an aggregate of $150.0 million.
We may suspend or discontinue the stock repurchase program at any time, and the stock repurchase program does not have an expiration date. 36 Performance Graph The following stock performance graph compares the cumulative total stockholder return over the last five fiscal years for (i) the Company’s common stock, (ii) the Standard & Poor’s 500 Index, and (iii) the Standard & Poor’s 500 Packaged Foods & Meats Index.
We may suspend or discontinue the stock repurchase program at any time, and the stock repurchase program does not have an expiration date. 33 Performance Graph The following stock performance graph compares the cumulative total stockholder return over the last five fiscal years for (i) the Company’s common stock, (ii) the Standard & Poor’s 500 Index, and (iii) the Standard & Poor’s 500 Packaged Foods & Meats Index.
The graph assumes the value of the investment in our common stock and each index was $100.00 on August 26, 2017 and assumes reinvestment of any dividends. The stock price performance below is not necessarily indicative of future stock price performance.
The graph assumes the value of the investment in our common stock and each index was $100.00 on August 25, 2018 and assumes reinvestment of any dividends. The stock price performance below is not necessarily indicative of future stock price performance.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information and Holders Our common stock is currently quoted on the Nasdaq Capital Market under the symbol “SMPL.” As of October 17, 2022, there were 98,993,701 shares outstanding and 20 record holders of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information and Holders Our common stock is currently quoted on the Nasdaq Capital Market under the symbol “SMPL.” As of October 18, 2023, there were 99,603,880 shares outstanding and 13 record holders of our common stock.
Under the stock repurchase program, we may repurchase shares from time to time in the open market or in privately negotiated transactions. The stock repurchase program does not obligate us to acquire any specific number of shares or acquire shares over any specific period of time.
The stock repurchase program does not obligate us to acquire any specific number of shares or acquire shares over any specific period of time.
Annual Return Percentage Fiscal Years Ending Company Name / Index August 26, 2017 August 25, 2018 August 31, 2019 August 29, 2020 August 28, 2021 August 27, 2022 The Simply Good Foods Company $ 100.00 $ 151.35 $ 249.41 $ 213.72 $ 297.56 $ 265.24 S&P 500 Index $ 100.00 $ 117.67 $ 119.79 $ 143.59 $ 184.58 $ 166.09 S&P 500 Packaged Foods & Meats Index $ 100.00 $ 94.82 $ 101.93 $ 110.35 $ 110.06 $ 122.48
Annual Return Percentage Fiscal Years Ending Company Name / Index August 25, 2018 August 31, 2019 August 29, 2020 August 28, 2021 August 27, 2022 August 26, 2023 The Simply Good Foods Company $ 100.00 $ 164.79 $ 141.21 $ 196.61 $ 175.25 $ 191.66 S&P 500 Index $ 100.00 $ 101.80 $ 122.03 $ 156.86 $ 141.15 $ 153.26 S&P 500 Packaged Foods & Meats Index $ 100.00 $ 107.49 $ 116.37 $ 116.07 $ 129.17 $ 123.53
Removed
Issuer Purchases of Equity Securities Total Number of Shares Purchased Maximum Dollar Value of Shares Total Number of Average Price as Part of Publicly Announced That May Yet Be Purchased Under Period Shares Purchased Paid Per Share Plans or Programs (1) the Plans or Programs (1) May 29, 2022 - June 25, 2022 58,638 $ 36.80 58,638 $ 67,191,259 June 26, 2022 - July 23, 2022 165,000 34.89 165,000 61,434,744 July 24, 2022 - August 27, 2022 707,140 33.15 707,140 37,995,160 Total 930,778 $ 33.69 930,778 $ 37,995,160 (1) We adopted a $50.0 million stock repurchase program on November 13, 2018.
Added
Issuer Purchases of Equity Securities We adopted a $50.0 million stock repurchase program on November 13, 2018.
Added
We did not repurchase any shares of our common stock under our stock repurchase program during the quarter ended August 26, 2023. As of August 26, 2023, approximately $71.5 million remained available under the stock repurchase program. Under the stock repurchase program, we may repurchase shares from time to time in the open market or in privately negotiated transactions.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeA discussion regarding our financial condition and results of operations for the fifty-two weeks ended August 28, 2021 compared to the fifty-two weeks ended August 29, 2020 can be found under Item 7 of our Annual Report on Form 10-K for the fiscal year ended August 28, 2021, filed with the SEC on October 26, 2021. 40 Comparison of Results for the Fifty-Two Weeks Ended August 27, 2022 and the Fifty-Two Weeks Ended August 28, 2021 The following table presents, for the periods indicated, selected information from our consolidated financial results, including information presented as a percentage of net sales: 52-Weeks Ended % of Net Sales 52-Weeks Ended % of Net Sales (In thousands) August 27, 2022 August 28, 2021 Net sales $ 1,168,678 100.0 % $ 1,005,613 100.0 % Cost of goods sold 723,117 61.9 % 595,847 59.3 % Gross profit 445,561 38.1 % 409,766 40.7 % Operating expenses: Selling and marketing 121,685 10.4 % 112,928 11.2 % General and administrative 103,832 8.9 % 106,181 10.6 % Depreciation and amortization 17,285 1.5 % 16,982 1.7 % Total operating expenses 242,802 20.8 % 236,091 23.5 % Income from operations 202,759 17.3 % 173,675 17.3 % Other income (expense): Interest income 15 — % 84 — % Interest expense (21,881) (1.9) % (31,557) (3.1) % Loss in fair value change of warrant liability (30,062) (2.6) % (66,197) (6.6) % Gain on legal settlement — — % 5,000 0.5 % Gain (loss) on foreign currency transactions 191 — % (5) — % Other expense (453) — % (140) — % Total other expense (52,190) (4.5) % (92,815) (9.2) % Income before income taxes 150,569 12.9 % 80,860 8.0 % Income tax expense 41,995 3.6 % 39,980 4.0 % Net income $ 108,574 9.3 % $ 40,880 4.1 % Other financial data: Adjusted EBITDA (1) $ 234,043 20.0 % $ 207,273 20.6 % (1) Adjusted EBITDA is a non-GAAP financial metric.
Biggest changeA discussion regarding our financial condition and results of operations for the fifty-two weeks ended August 27, 2022 compared to the fifty-two weeks ended August 28, 2021 can be found under Item 7 of our Annual Report on Form 10-K for the fiscal year ended August 27, 2022, filed with the SEC on October 21, 2022. 36 Comparison of Results for the Fifty-Two Weeks Ended August 26, 2023 and the Fifty-Two Weeks Ended August 27, 2022 The following table presents, for the periods indicated, selected information from our consolidated financial results, including information presented as a percentage of net sales: 52-Weeks Ended % of Net Sales 52-Weeks Ended % of Net Sales (In thousands) August 26, 2023 August 27, 2022 Net sales $ 1,242,672 100.0 % $ 1,168,678 100.0 % Cost of goods sold 789,252 63.5 % 723,117 61.9 % Gross profit 453,420 36.5 % 445,561 38.1 % Operating expenses: Selling and marketing 119,489 9.6 % 121,685 10.4 % General and administrative 111,566 9.0 % 103,832 8.9 % Depreciation and amortization 17,416 1.4 % 17,285 1.5 % Total operating expenses 248,471 20.0 % 242,802 20.8 % Income from operations 204,949 16.5 % 202,759 17.3 % Other income (expense): Interest income 1,144 0.1 % 15 — % Interest expense (30,068) (2.4) % (21,881) (1.9) % Loss in fair value change of warrant liability — — % (30,062) (2.6) % (Loss) gain on foreign currency transactions (344) — % 191 — % Other expense 11 — % (453) — % Total other expense (29,257) (2.4) % (52,190) (4.5) % Income before income taxes 175,692 14.1 % 150,569 12.9 % Income tax expense 42,117 3.4 % 41,995 3.6 % Net income $ 133,575 10.7 % $ 108,574 9.3 % Other financial data: Adjusted EBITDA (1) $ 245,555 19.8 % $ 234,043 20.0 % (1) Adjusted EBITDA is a non-GAAP financial metric.
A base rate equaling the higher of (a) the “prime rate,” (b) the federal funds effective rate plus 0.50%, or (c) the Adjusted Term SOFR Rate (as defined in the Credit Agreement) applicable for an interest period of one month plus 1.00% plus (x) 2.25% margin for the Term Loan or (y) 2.00% margin for the Revolving Credit Facility; or ii.
A base rate equaling the higher of (a) the “prime rate,” (b) the federal funds effective rate plus 0.50%, or (c) the Adjusted Term SOFR Rate (as defined in the Credit Agreement) applicable for an interest period of one month plus 1.00% plus (x) 1.50% margin for the Term Loan or (y) 2.00% margin for the Revolving Credit Facility; or ii.
Other companies in similar businesses may use different estimation policies and methodologies, which may affect the comparability of our financial condition, results of operations and cash flows to those of other companies. Revenue Recognition We recognize revenue when performance obligations under the terms of a contract with its customer are satisfied.
Other companies in similar businesses may use different estimation policies and methodologies, which may affect the comparability of our financial condition, results of operations and cash flows to those of other companies. Revenue Recognition We recognize revenue when performance obligations under the terms of a contract with our customer are satisfied.
We also have intangible assets that have determinable useful lives, consisting primarily of customer relationships, proprietary recipes and formulas, licensing agreements, and software and website development costs. Costs of these finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives.
We also have intangible assets that have determinable useful lives, consisting primarily of customer relationships, proprietary recipes and formulas, licensing agreements, and software and website development costs. Costs of these finite-lived intangible assets are 43 amortized on a straight-line basis over their estimated useful lives.
Impairment is indicated if the estimated fair value of the reporting unit or indefinite-lived intangible asset is less than the carrying amount, and an impairment charge is recognized for the differential. For fiscal year 2022 and 2021, we performed qualitative assessments of goodwill and indefinite-lived intangible assets.
Impairment is indicated if the estimated fair value of the reporting unit or indefinite-lived intangible asset is less than the carrying amount, and an impairment charge is recognized for the differential. For fiscal year 2023, 2022 and 2021, we performed qualitative assessments of goodwill and indefinite-lived intangible assets.
We continue to monitor customer and consumer demand along with our supply chain and logistics capabilities and intend to adapt our plans as needed to continue to drive our business and meet our obligations Please also see the information under Item 1A.
We continue to monitor customer and consumer demand along with our supply chain and logistics capabilities and intend to adapt our plans as needed to continue to drive our business and meet our obligations. 35 Please also see the information under Item 1A.
Operating expenses consist primarily of selling and marketing, general and administrative, and depreciation and amortization. The following is a brief description of the components of operating expenses: • Selling and marketing. Selling and marketing expenses comprise broker commissions, customer marketing, media and other marketing costs. • General and administrative.
Operating expenses consist primarily of selling and marketing, general and administrative, and depreciation and amortization expense. The following is a brief description of the components of operating expenses: • Selling and marketing. Selling and marketing expenses comprise broker commissions, customer marketing, media and other marketing costs. • General and administrative.
For a reconciliation of Adjusted EBITDA to its most directly comparable GAAP measure, see “Reconciliation of EBITDA and Adjusted EBITDA” below. 42 Reconciliation of EBITDA and Adjusted EBITDA EBITDA and Adjusted EBITDA are non-GAAP financial measures commonly used in our industry and should not be construed as alternatives to net income as an indicator of operating performance or as alternatives to cash flow provided by operating activities as a measure of liquidity (each as determined in accordance with GAAP).
For a reconciliation of Adjusted EBITDA to its most directly comparable GAAP measure, see “Reconciliation of EBITDA and Adjusted EBITDA” below. 38 Reconciliation of EBITDA and Adjusted EBITDA EBITDA and Adjusted EBITDA are non-GAAP financial measures commonly used in our industry and should not be construed as alternatives to net income as an indicator of operating performance or as alternatives to cash flow provided by operating activities as a measure of liquidity (each as determined in accordance with GAAP).
Uncertainties 46 related to the estimate of variable consideration are resolved in a short time frame and do not require any additional constraint on variable consideration. Adjustments to variable consideration have historically been insignificant. Although some payment terms may be longer, the majority of our payment terms are less than 60 days.
Uncertainties related to the estimate of variable consideration are resolved in a short time frame and do not require any additional constraint on variable consideration. Adjustments to variable consideration have historically been insignificant. 42 Although some payment terms may be longer, the majority of our payment terms are less than 60 days.
Overview 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, and other product offerings.
Overview 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, as well as other product offerings.
Management of the Company uses EBITDA and Adjusted EBITDA to supplement net income because these measures reflect operating results of the on-going operations, eliminate items that are not directly attributable to the Company’s underlying operating performance, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to the key metrics the Company’s management uses in its financial and operational decision making.
Management uses EBITDA and Adjusted EBITDA to supplement net income because these measures reflect operating results of the on-going operations, eliminate items that are not directly attributable to our underlying operating performance, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to the key metrics management uses in its financial and operational decision making.
We also determined that there was no material risk for future possible intangible impairments related to our finite-lived intangible assets as of the date of the most recent assessments. Income Taxes We are subject to income taxes in the United States and numerous other jurisdictions.
We also determined that there was no material risk of intangible impairments related to our finite-lived intangible assets as of the date of the most recent assessments. Income Taxes We are subject to income taxes in the United States and numerous other jurisdictions.
Substantially concurrent with the consummation of the business combination between Conyers Park Acquisition Corp. and NCP-ATK Holdings, Inc. on July 7, 2017, the full $200.0 million of the Term Facility (the “Term Loan”) was drawn.
Substantially concurrent with the consummation of the business combination which formed the Company between Conyers Park Acquisition Corp. and NCP-ATK Holdings, Inc. on July 7, 2017, the full $200.0 million of the Term Facility (the “Term Loan”) was drawn.
Our net cash used in investing activities for the fifty-two weeks ended August 27, 2022 primarily comprised $5.2 million of purchases of property and equipment and the issuance of a $2.4 million note receivable.
The $8.2 million of net cash used in investing activities for the fifty-two weeks ended August 27, 2022 primarily comprised the $5.2 million purchases of property and equipment and the issuance of a $2.4 million note receivable. Financing activities.
Our fiscal quarters for fiscal 2022 ended on November 27, 2021, February 26, 2022, May 28, 2022 and August 27, 2022. Unless the context requires otherwise in this Report, the terms “we,” “us,” “our,” the “Company” and “Simply Good Foods” refer to The Simply Good Foods Company and its subsidiaries.
Our fiscal quarters for fiscal 2023 ended on November 26, 2022, February 25, 2023, May 27, 2023 and August 26, 2023. Unless the context requires otherwise in this Report, the terms “we,” “us,” “our,” the “Company” and “Simply Good Foods” refer to The Simply Good Foods Company and its subsidiaries.
The Extension Amendment provided for an extension of the stated maturity date of the Revolving Commitments and Revolving Loans (each as defined in the Credit Agreement) from July 7, 2022 to the earlier of (i) 91 days prior to the maturity date of the Initial Term Loans on July 7, 2024 and (ii) December 16, 2026.
The Extension Amendment provided for an extension of the stated maturity date of the Revolving Commitments and Revolving Loans (each as defined in the Credit Agreement) from July 7, 2022 to the earlier of (i) 91 days prior to the then-effective maturity date of the Initial Term Loans and (ii) December 16, 2026.
For the fifty-two weeks ended August 27, 2022, August 28, 2021 and August 29, 2020, we did not identify indicators of impairment related to our finite-lived intangible assets, and as such there were no impairments recorded related to finite-lived intangible assets.
For the fifty-two weeks ended August 26, 2023, August 27, 2022 and August 28, 2021, we did not identify indicators of impairment related to our finite-lived intangible assets, and as such there were no impairments recorded related to finite-lived intangible assets.
On January 21, 2022, we entered into a repricing amendment (the “2022 Repricing Amendment”) to the Credit Agreement.
On January 21, 2022, we entered into the “2022 Repricing Amendment” to the Credit Agreement.
As of August 27, 2022 and August 28, 2021, the allowance for trade promotions was $23.9 million and $22.3 million, respectively. Differences between estimated expense and actual redemptions are recognized as a change in management estimate in a subsequent period. These differences have historically been insignificant.
As of August 26, 2023 and August 27, 2022, the allowance for trade promotions was $28.8 million and $23.9 million, respectively. Differences between estimated expense and actual redemptions are recognized as a change in management estimate in a subsequent period. These differences have historically been insignificant.
The decrease in cash provided by operating activities was primarily attributable to changes in working capital, comprised of changes in accounts receivable, net, inventories, prepaid expenses, accounts payable, and accrued expenses and other current liabilities, which are driven by the timing of payments and receipts and seasonal building of inventory.
Changes in operating activity cash was primarily attributable to an improvement in working capital, comprised of changes in accounts receivable, net, inventories, prepaid expenses, accounts payable, and accrued expenses and other current liabilities, which are driven by the timing of payments and receipts and seasonal building of inventory.
Our fiscal year ends the last Saturday in August. Our fiscal years 2022, 2021, and 2020 ended August 27, 2022, August 28, 2021, and August 29, 2020 , respectively, and were each fifty-two week periods.
Our fiscal year ends the last Saturday in August. Our fiscal years 2023, 2022, and 2021 ended August 26, 2023, August 27, 2022, and August 28, 2021, respectively, and were each fifty-two week periods.
The Company also believes that EBITDA and Adjusted EBITDA are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in its industry. EBITDA and Adjusted EBITDA may not be comparable to other similarly titled captions of other companies due to differences in the non-GAAP calculation.
We also believe that EBITDA and Adjusted EBITDA are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. EBITDA and Adjusted EBITDA may not be comparable to other similarly titled captions of other companies due to differences in the non-GAAP calculation.
The 2022 Repricing Amendment, among other things, (i) reduced the interest rate per annum applicable to the Initial Term Loans outstanding under the Credit Agreement immediately prior to the effective date of the 2022 Repricing Amendment, (ii) reset the prepayment premium for the existing Initial Term Loans to apply to Repricing Transactions (as defined in the Credit Agreement) that occur within six months after the effective date of the 2022 Repricing Amendment, and (iii) implemented the Secured Overnight Financing Rate (“SOFR”) and related replacement provisions for the London Interbank Offered Rate (“LIBOR”).
The 2022 Repricing Amendment, among other things, (i) reduced the interest rate per annum applicable to the Initial Term Loans outstanding under the Credit Agreement immediately prior to the effective date of the 2022 Repricing Amendment, (ii) reset the prepayment premium for the existing Initial Term Loans to apply to Repricing Transactions (as defined in the Credit Agreement) that occur within six months after the effective date of the 2022 Repricing Amendment, and (iii) implemented SOFR and related replacement provisions for LIBOR.
We were in compliance with all financial covenants as of August 27, 2022 and August 28, 2021, respectively. As of August 27, 2022, the outstanding balance of the Term Facility was $406.5 million. We are not required to make principal payments on the Term Facility over the twelve months following the period ended August 27, 2022.
We were in compliance with all financial covenants as of August 26, 2023 and August 27, 2022, respectively. As of August 26, 2023, the outstanding balance of the Term Facility was $285.0 million. We are not required to make principal payments on the Term Facility over the twelve months following the period ended August 26, 2023.
Simply Good Foods defines EBITDA as net income or loss before interest income, interest expense, income tax expense, depreciation and amortization, and Adjusted EBITDA as further adjusted to exclude the following items: stock-based compensation expense, integration costs, restructuring costs, gain or loss in fair value change of warrant liability, gain or loss due to legal settlements, and other non-core expenses.
Simply Good Foods defines EBITDA as net income or loss before interest income, interest expense, income tax expense, depreciation and amortization, and Adjusted EBITDA as further adjusted to exclude the following items: stock-based compensation expense, executive transition costs, term loan transaction fees, integration costs, restructuring costs, loss in fair value change of warrant liability, and other non-core expenses.
Additionally, interest expense related to the amortization of deferred financing costs and debt discount decreased $2.1 million for the fifty-two weeks ended August 27, 2022 compared to the fifty-two weeks ended August 28, 2021. Loss in fair value change of warrant liability .
Additionally, interest expense related to the amortization of deferred financing costs and debt discount increased $0.2 million for the fifty-two weeks ended August 26, 2023 compared to the fifty-two weeks ended August 27, 2022. Loss in fair value change of warrant liability .
The Company believes that EBITDA and Adjusted EBITDA, when used in conjunction with net income, are useful to provide additional information to investors.
We believe that EBITDA and Adjusted EBITDA, when used in conjunction with net income, are useful to provide additional information to investors.
During the fifty-two weeks ended August 27, 2022 and August 28, 2021, we recorded a non-cash loss of $30.1 million and $66.2 million, respectively, related to changes in valuation of our liability-classified warrants issued through a private placement (“Private Warrants”), which was primarily driven by movements in our stock price.
There were no outstanding liability-classified warrants issued through a private placement (“Private Warrants”) during the fifty-two weeks ended August 26, 2023. During the fifty-two weeks ended August 27, 2022, we recorded a non-cash loss of $30.1 million related to changes in valuation of our liability-classified Private Warrants, which was primarily driven by movements in our stock price.
Our net cash used in financing activities was $110.0 million for the fifty-two weeks ended August 27, 2022 compared to $150.0 million for the fifty-two weeks ended August 28, 2021.
Our net cash used in financing activities was $138.5 million for the fifty-two weeks ended August 26, 2023 compared to $110.0 million for the fifty-two weeks ended August 27, 2022.
A discussion regarding the major sources and uses of cash for the fifty-two weeks ended August 29, 2020 can be found under Item 7 of our Annual Report on Form 10-K for the fiscal year ended August 28, 2021, filed with the SEC on October 26, 2021. 52-Weeks Ended 52-Weeks Ended (In thousands) August 27, 2022 August 28, 2021 Net cash provided by operating activities $ 110,639 $ 132,089 Net cash used in investing activities $ (8,156) $ (2,506) Net cash used in financing activities $ (110,032) $ (150,049) 45 Operating activities.
A discussion regarding the major sources and uses of cash for the fifty-two weeks ended August 28, 2021 can be found under Item 7 of our Annual Report on Form 10-K for the fiscal year ended August 27, 2022, filed with the SEC on October 21, 2022. 52-Weeks Ended 52-Weeks Ended (In thousands) August 26, 2023 August 27, 2022 Net cash provided by operating activities $ 171,117 $ 110,639 Net cash used in investing activities $ (12,188) $ (8,156) Net cash used in financing activities $ (138,532) $ (110,032) 41 Operating activities.
As a result, we determined our operations are organized into one, consolidated operating segment and reportable segment. Previously, during the fifty-two weeks ended August 28, 2021 and August 29, 2020, we had two operating segments, Atkins and Quest, which were aggregated into one reporting segment due to similar financial, economic and operating characteristics. Key Financial Definitions Net sales.
Previously, during the fifty-two weeks ended August 28, 2021, we had two operating segments, Atkins and Quest, which were aggregated into one reporting segment due to similar financial, economic and operating characteristics. Key Financial Definitions Net sales.
Income tax expense increased $2.0 million for the fifty-two weeks ended August 27, 2022 compared to the fifty-two weeks ended August 28, 2021. The increase in our income tax expense is primarily driven by higher income from operations. Net income.
Income tax expense increased $0.1 million for the fifty-two weeks ended August 26, 2023 compared to the fifty-two weeks ended August 27, 2022. The increase in our income tax expense is primarily driven by higher income from operations and changes in permanent differences. Net income.
See “Reconciliation of EBITDA and Adjusted EBITDA” below for a reconciliation of net income to EBITDA and Adjusted EBITDA for each applicable period. Net sales. Net sales of $1,168.7 million represented an increase of $163.1 million, or 16.2%, for the fifty-two weeks ended August 27, 2022 compared to the fifty-two weeks ended August 28, 2021.
See “Reconciliation of EBITDA and Adjusted EBITDA” below for a reconciliation of net income to EBITDA and Adjusted EBITDA for each applicable period. Net sales. Net sales of $1,242.7 million represented an increase of $74.0 million, or 6.3%, for the fifty-two weeks ended August 26, 2023 compared to the fifty-two weeks ended August 27, 2022.
As a result of the cashless exercise on January 7, 2022, there were no outstanding Private Warrants as of August 27, 2022. During the reporting periods the Private Warrants were outstanding, we accounted for our Private Warrants as a derivative warrant liability in accordance with ASC Topic 815-40, Derivatives and Hedging: Contracts in Entity’s Own Equity.
During the reporting periods the Private Warrants were outstanding, we accounted for our Private Warrants as a derivative warrant liability in accordance with ASC Topic 815-40, Derivatives and Hedging: Contracts in Entity’s Own Equity.
Operating expenses increased $6.7 million, or 2.8%, for the fifty-two weeks ended August 27, 2022 compared to the fifty-two weeks ended August 28, 2021 due to the following: • Selling and marketing .
Operating expenses increased $5.7 million, or 2.3%, for the fifty-two weeks ended August 26, 2023 compared to the fifty-two weeks ended August 27, 2022 due to the following: 37 • Selling and marketing .
Significant management judgment is required in determining the effective tax rate, evaluating tax positions and determining the net realizable value of deferred tax assets. Warrant Liability As of August 28, 2021, we had outstanding Private Warrants that allowed holders to purchase 6,700,000 shares of our common stock. Such Private Warrants were held by Conyers Park, a related party.
Significant management judgment is required in determining the effective tax rate, evaluating tax positions and determining the net realizable value of deferred tax assets. Warrant Liability During the fifty-two weeks ended August 27, 2022 and August 28, 2021, we had outstanding Private Warrants that allowed holders to purchase 6,700,000 shares of our common stock.
Our net cash provided by operating activities decreased $21.5 million to $110.6 million for the fifty-two weeks ended August 27, 2022 compared to $132.1 million for the fifty-two weeks ended August 28, 2021.
Our net cash provided by operating activities increased $60.5 million to $171.1 million for the fifty-two weeks ended August 26, 2023 compared to $110.6 million for the fifty-two weeks ended August 27, 2022.
Changes in working capital consumed cash of $63.8 million in the fifty-two weeks ended August 27, 2022 compared to $21.5 million of cash consumed in the fifty-two weeks ended August 28, 2021.
Changes in working capital consumed cash of $21.2 million, an improvement of $42.6 million, in the fifty-two weeks ended August 26, 2023 compared to $63.8 million of cash consumed in the fifty-two weeks ended August 27, 2022.
Additionally, cash paid for interest was $19.2 million in the fifty-two weeks ended August 27, 2022, which was a decrease of $8.6 million as compared to the $27.8 million paid for interest in the fifty-two weeks ended August 28, 2021. Investing activities.
Additionally, cash paid for interest was $25.5 million in the fifty-two weeks ended August 26, 2023, which was a increase of $6.3 million as compared to the $19.2 million paid for interest in the fifty-two weeks ended August 27, 2022.
However, unfavorable effects of higher raw material costs, freight, and logistics costs and supply chain challenges in the fifty-two weeks ended August 27, 2022 resulted in decreased gross profit margin as compared to the fifty-two weeks ended August 28, 2021.
Unfavorable raw material, packaging, and co-manufacturing costs and supply chain challenges in the fifty-two weeks ended August 26, 2023 resulted in decreased gross profit margin as compared to the fifty-two weeks ended August 27, 2022.
On January 7, 2022, the Private Warrants were fully exercised on a cashless basis, resulting in a net issuance of 4,830,761 shares of our common stock. As a result, there were no outstanding liability-classified Private Warrants as of August 27, 2022. Gain on legal settlement.
On January 7, 2022, Conyers Park elected to exercise the Private Warrants in full on a cashless basis, resulting in a net issuance of 4,830,761 shares of our common stock. As a result of the cashless exercise on January 7, 2022, there were no outstanding Private Warrants as of August 26, 2023 or August 27, 2022.
Net income was $108.6 million for the fifty-two weeks ended August 27, 2022, an increase of $67.7 million, compared to net income of $40.9 million for the fifty-two weeks ended August 28, 2021.
Net income was $133.6 million for the fifty-two weeks ended August 26, 2023, an increase of $25.0 million, compared to net income of $108.6 million for the fifty-two weeks ended August 27, 2022.
Accordingly, no further impairment assessment was necessary, and no impairment charges related to goodwill or indefinite-lived intangibles were recognized in the fifty-two weeks ended August 27, 2022 or August 28, 2021.
Accordingly, no further impairment assessment was necessary, and no impairment charges related to goodwill or indefinite-lived intangibles were recognized in the fifty-two weeks ended August 26, 2023, August 27, 2022, or August 28, 2021. Additionally, we determined there was not a material risk of impairments as of the date of the most recent assessment.
During the fifty-two weeks ended August 27, 2022, we repurchased 1,720,520 shares of common stock for $59.9 million, averaging a purchase price per share of $34.79. We did not repurchase any shares of common stock during the fifty-two weeks ended August 28, 2021 and August 29, 2020.
During the fifty-two weeks ended August 26, 2023, we repurchased 546,346 shares of common stock for $16.4 million, averaging a purchase price per share of $30.11. During the fifty-two weeks ended August 27, 2022, we repurchased 1,720,520 shares of common stock for $59.9 million, averaging a purchase price per share of $34.79.
Net cash used in financing activities for the fifty-two weeks ended August 27, 2022 primarily consisted of $50.0 million in principal payments on the Term Facility and $59.9 million in repurchases in common stock. Net cash used in financing activities for the fifty-two weeks ended August 28, 2021 primarily consisted of $150.0 million in principal payments on the Term Facility.
Net cash used in financing activities for the fifty-two weeks ended August 26, 2023 primarily consisted of $121.5 million in principal payments on the Term Facility and $16.4 million in repurchases in common stock.
Critical Accounting Policies, Judgments and Estimates General Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. While the majority of our revenue, expenses, assets and liabilities are not based on estimates, there are certain accounting principles that require management to make estimates regarding matters that are uncertain and susceptible to change.
While the majority of our revenue, expenses, assets and liabilities are not based on estimates, there are certain accounting principles that require management to make estimates regarding matters that are uncertain and susceptible to change.
General and administrative expenses decreased $2.3 million, or 2.2%, for the fifty-two weeks ended August 27, 2022 compared to the fifty-two weeks ended August 28, 2021.
General and administrative expenses increased $7.7 million, or 7.4%, for the fifty-two weeks ended August 26, 2023 compared to the fifty-two weeks ended August 27, 2022.
A discussion regarding our financial condition and results of operations for the fifty-two weeks ended August 27, 2022 compared to the fifty-two weeks ended August 28, 2021 is presented below.
See “Reconciliation of EBITDA and Adjusted EBITDA” below for a reconciliation of EBITDA and Adjusted EBITDA to net income for each applicable period. A discussion regarding our financial condition and results of operations for the fifty-two weeks ended August 26, 2023 compared to the fifty-two weeks ended August 27, 2022 is presented below.
Interest income was immaterial for the fifty-two weeks ended August 27, 2022 compared to interest income of $0.1 million for the fifty-two weeks ended August 28, 2021. Interest expense.
Interest income was $1.1 million for the fifty-two weeks ended August 26, 2023 compared to an immaterial amount of interest income for the fifty-two weeks ended August 27, 2022, primarily due to the increase in interest rates. Interest expense.
We perform our goodwill impairment assessment for each reporting unit that has goodwill. The process of evaluating goodwill and indefinite-lived intangibles for impairment is subjective and requires significant judgment at many points during the analysis. During the fifty-two weeks ended August 27, 2022, we substantially completed our efforts to fully integrate our operations and organization structure after the Quest Acquisition.
We perform our goodwill impairment assessment for each reporting unit that has goodwill. The process of evaluating goodwill and indefinite-lived intangibles for impairment is subjective and requires significant judgment at many points during the analysis.
Our net cash used in investing activities was $8.2 million for the fifty-two weeks ended August 27, 2022 compared to $2.5 million for the fifty-two weeks ended August 28, 2021.
Our net cash used in investing activities was $12.2 million for the fifty-two weeks ended August 26, 2023 compared to $8.2 million for the fifty-two weeks ended August 27, 2022. Our net cash used in investing activities for the fifty-two weeks ended August 26, 2023 primarily comprised $11.6 million of purchases of property and equipment.
As of August 27, 2022, there were no amounts drawn against the Revolving Credit Facility. 44 Stock Repurchase Program On April 13, 2022, we announced that our Board of Directors had approved the addition of $50.0 million to our stock repurchase program, resulting in authorized stock repurchases of up to an aggregate of $100.0 million.
Stock Repurchase Program On October 21, 2022, we announced that our Board of Directors had approved the addition of $50.0 million to our stock repurchase program, resulting in authorized stock repurchases of up to an aggregate of $150.0 million.
We aligned the nature of our production processes and the methods used to distribute products to customers for the Atkins® and Quest® brands. We also designed our organizational structure to support entity-wide business functions across brands, products, customers, and geographic regions. Additionally, our chief operating decision maker reviews operating results and forecasts at the consolidated level.
Our Reportable Segment For each of the fifty-two weeks ended August 26, 2023 and August 27, 2022, we determined our operations are organized into one, consolidated operating segment and reportable segment based on the following: • Our Atkins® and Quest® brands are closely aligned in the nature of our production processes, the brands’ product offerings, and the methods used to distribute our products to customers; • Our organizational structure is designed to support entity-wide business functions across brands, products, customers, and geographic regions; and, • Our chief operating decision maker reviews operating results and forecasts at the consolidated level.
We aligned the nature of our production processes and the methods used to distribute products to customers for the Atkins® and Quest® brands. We also designed our organizational structure to support entity-wide business functions across brands, products, customers, and geographic regions. Additionally, our chief operating decision maker reviews operating results and forecasts at the consolidated level.
For each of the fifty-two weeks ended August 26, 2023 and August 27, 2022, we determined our operations are organized into one, consolidated operating segment and reportable segment based on the following: • Our Atkins® and Quest® brands are closely aligned in the nature of our production processes, the brands’ product offerings, and the methods used to distribute our products to customers; • Our organizational structure is designed to support entity-wide business functions across brands, products, customers, and geographic regions; and, • Our chief operating decision maker reviews operating results and forecasts at the consolidated level.
Refer to Note 7, Long-Term Debt and Line of Credit, and Note 10, Leases, of the Consolidated Financial Statements included in Item 8 of this Report for additional information related to the expected timing and amount of payments related to our contractual and other obligations. 43 Debt and Credit Facilities On July 7, 2017, we entered into a credit agreement with Barclays Bank PLC and other parties (as amended to date, the “Credit Agreement”).
Refer to Note 6, Long-Term Debt and Line of Credit, and Note 9, Leases, of the Consolidated Financial Statements included in Item 8 of this Report for additional information related to the expected timing and amount of payments related to our contractual and other obligations.
SOFR plus a credit spread adjustment equal to 0.10% for one-month SOFR, 0.15% for up to three-month SOFR and 0.25% for up to six-month SOFR, subject to a floor of 0.50%, plus (x) 3.25% margin for the Term Loan or (y) 3.00% margin for the Revolving Credit Facility.
SOFR plus a credit spread adjustment equal to 0.10% for one-month SOFR, 0.15% for up to three-month SOFR and 0.25% for up to six-month SOFR, subject to a floor of 0.50%, plus (x) 2.50% margin for the Term Loan or (y) 3.00% margin for the Revolving Credit Facility. 40 In connection with the closing of the 2023 Repricing Amendment, we expensed $2.4 million primarily for third-party fees and capitalized an additional $2.7 million primarily for the payment of upfront lender fees (original issue discount).
The expected volatility was historically a key assumption or input to the valuation of the Private Warrants, however changes in the expected volatility assumption had less of an effect on the Black-Scholes model valuation as the Private Warrants approached their expiration. 48 New Accounting Pronouncements Refer to Note 2, Summary of Significant Accounting Policies, of the Consolidated Financial Statements included in Item 8 of this Report for information regarding recently issued accounting standards. 49
The expected volatility was historically a key assumption or input to the valuation of the Private Warrants, however changes in the expected volatility assumption had less of an effect on the Black-Scholes model valuation as the Private Warrants approached their expiration.
The product portfolio we develop, market and sell consists primarily of protein bars, ready-to-drink (“RTD”) shakes, sweet and salty snacks and confectionery products marketed under the Atkins®, Atkins Endulge®, Quest® and Quest Hero TM brand names.
The product portfolio we develop, market and sell consists primarily of protein bars, ready-to-drink (“RTD”) shakes, sweet and salty snacks and confectionery products marketed under the Atkins® and Quest® brand names. We believe Simply Good Foods is poised to expand its wellness platform through innovation and organic growth along with acquisition opportunities in the nutritional snacking space.
Results of Operations During the fifty-two weeks ended August 27, 2022, our net sales increased $163.1 million, or 16.2%, and our gross profit increased $35.8 million, or 8.7%, compared to the fifty-two weeks ended August 28, 2021.
Results of Operations During the fifty-two weeks ended August 26, 2023, our net sales increased $74.0 million, or 6.3%, to $1,242.7 million compared to net sales of $1,168.7 million for the fifty-two weeks ended August 27, 2022.
Adjusted EBITDA increased $26.8 million, or 12.9%, for the fifty-two weeks ended August 27, 2022 compared to the fifty-two weeks ended August 28, 2021, driven primarily by sales volume growth for the Atkins® and Quest® brands, which was partially offset by the unfavorable effects of higher raw material, freight, and logistics costs and supply chain challenges in the fifty-two weeks ended August 27, 2022 as discussed above.
Adjusted EBITDA increased $11.5 million, or 4.9%, for the fifty-two weeks ended August 26, 2023 compared to the fifty-two weeks ended August 27, 2022, driven primarily by net sales growth due to the price increase effective in the fourth quarter of fiscal year 2022, partially offset by unfavorable raw material, packaging, and co-manufacturing costs and supply chain challenges in the fifty-two weeks ended August 26, 2023 as previously discussed.
As a result, we determined our operations are organized into one, consolidated operating segment and reporting unit. Previously, during the fifty-two weeks ended August 28, 2021 and August 29, 2020, we had two reporting units which were our operating segments, Atkins and Quest.
Previously, during the fifty-two weeks ended August 28, 2021, we had two operating segments, Atkins and Quest, which were aggregated into one reporting segment due to similar financial, economic and operating characteristics.
Interest expense decreased $9.7 million for the fifty-two weeks ended August 27, 2022 compared to the fifty-two weeks ended August 28, 2021 primarily due to principal payments reducing the outstanding balance of the Term Facility (as defined below) to $406.5 million as of August 27, 2022 from $456.5 million as of August 28, 2021.
Interest expense increased $8.2 million for the fifty-two weeks ended August 26, 2023 compared to the fifty-two weeks ended August 27, 2022 primarily due to the increase in interest rates on our Term Facility (as defined below) to 7.9% as of August 26, 2023 from 6.2% as of August 27, 2022.
Selling and marketing expenses increased $8.8 million, or 7.8%, for the fifty-two weeks ended August 27, 2022 compared to the fifty-two weeks ended August 28, 2021, primarily related to additional brand building initiatives for both Atkins® and Quest®. • General and administrative .
Selling and marketing expenses decreased $2.2 million, or 1.8%, for the fifty-two weeks ended August 26, 2023 compared to the fifty-two weeks ended August 27, 2022, primarily related to a reduction in marketing spend. • General and administrative .
The following unaudited table provides a reconciliation of EBITDA and Adjusted EBITDA to its most directly comparable GAAP measure, which is net income, for the fifty-two weeks ended August 27, 2022 and August 28, 2021: 52-Weeks Ended 52-Weeks Ended (In thousands) August 27, 2022 August 28, 2021 Net income $ 108,574 $ 40,880 Interest income (15) (84) Interest expense 21,881 31,557 Income tax expense 41,995 39,980 Depreciation and amortization 19,299 18,174 EBITDA 191,734 130,507 Stock-based compensation expense 11,697 8,265 Integration of Quest 468 2,928 Restructuring 98 4,324 Loss in fair value change of warrant liability 30,062 66,197 Gain on legal settlement — (5,000) Other (1) (16) 52 Adjusted EBITDA $ 234,043 $ 207,273 (1) Other items consist principally of exchange impact of foreign currency transactions and other expenses.
The following unaudited table provides a reconciliation of EBITDA and Adjusted EBITDA to its most directly comparable GAAP measure, which is net income, for the fifty-two weeks ended August 26, 2023 and August 27, 2022: 52-Weeks Ended 52-Weeks Ended (In thousands) August 26, 2023 August 27, 2022 Net income $ 133,575 $ 108,574 Interest income (1,144) (15) Interest expense 30,068 21,881 Income tax expense 42,117 41,995 Depreciation and amortization 20,253 19,299 EBITDA 224,869 191,734 Stock-based compensation expense 14,480 11,697 Executive transition costs 3,390 — Term loan transaction fees 2,423 — Integration of Quest — 468 Restructuring — 98 Loss in fair value change of warrant liability — 30,062 Other (1) 393 (16) Adjusted EBITDA $ 245,555 $ 234,043 (1) Other items consist principally of exchange impact of foreign currency transactions and other expenses. 39 Liquidity and Capital Resources Overview We have historically funded our operations with cash flow from operations and, when needed, with borrowings under our Credit Agreement (as defined below).
Additionally, cash paid for taxes increased $17.0 million to $49.2 million for the fifty-two weeks ended August 27, 2022 as compared to $32.2 million for the fifty-two weeks ended August 28, 2021.
In addition, cash paid for taxes decreased $21.8 million to $27.4 million for the fifty-two weeks ended August 26, 2023 as compared to $49.2 million for the fifty-two weeks ended August 27, 2022. Investing activities.
As of August 27, 2022, approximately $38.0 million remained available for repurchases under our $100.0 million stock repurchase program. Refer to Note 12, Stockholders’ Equity of the Consolidated Financial Statements included in Item 8 of this Report for additional information related to our stock repurchase program.
Refer to Note 11, Stockholders’ Equity of the Consolidated Financial Statements included in Item 8 of this Report for additional information related to our stock repurchase program. Cash Flows The following table sets forth the major sources and uses of cash for the fifty-two weeks ended August 26, 2023 and August 27, 2022.
Gross profit of $445.6 million, or 38.1% of net sales, for the fifty-two weeks ended August 27, 2022 decreased 260 basis points from 40.7% of net sales for the fifty-two weeks ended August 28, 2021.
Gross profit as a percentage of net sales was 36.5% for the fifty-two weeks ended August 26, 2023, a decrease of 160 basis points from 38.1% of net sales for the fifty-two weeks ended August 27, 2022.
Liquidity and Capital Resources Overview We have historically funded our operations with cash flow from operations and, when needed, with borrowings under our Credit Agreement (as defined below). Our principal uses of cash have been working capital, debt service, repurchases of our common stock, and acquisition opportunities. We had $67.5 million in cash as of August 27, 2022.
Our principal uses of cash have been working capital, debt service, repurchases of our common stock, and acquisition opportunities. We had $87.7 million in cash as of August 26, 2023.
The decrease in gross profit margin was partially offset by the favorable effects of the price increases which became effective in the first and fourth quarters of fiscal year 2022. Operating expenses.
This decrease in gross profit margin was primarily driven by unfavorable raw material, packaging, and co-manufacturing costs and supply chain challenges, partially offset by the price increase effective in the fourth quarter of fiscal year 2022. Operating expenses.
The increase in net income was primarily related to the $29.1 million increase in income from operations driven by the Atkins® and Quest® brand sales volume growth as discussed above, the $36.1 million decrease in the non-cash loss in fair value change of our Private Warrant liability, and the $9.7 million decrease in interest expense in the fifty-two weeks ended August 27, 2022 compared to the fifty-two weeks ended August 28, 2021.
The increase was primarily driven by the $30.1 million non-cash fair value loss incurred in the fifty-two weeks ended August 27, 2022 related to the measurement of our liability-classified Private Warrants which did not repeat in fiscal year 2023, and growth in net sales. Adjusted EBITDA.
Each whole warrant entitled the holder to purchase one share of our common stock at a price of $11.50 per share. On January 7, 2022, Conyers Park elected to exercise the Private Warrants in full on a cashless basis, resulting in a net issuance of 4,830,761 shares of the Company’s common stock.
Such Private Warrants were held by Conyers Park Sponsor, LLC (“Conyers Park”), a related party. Each whole warrant entitled the holder to purchase one share of our common stock at a price of $11.50 per share.
The increase was primarily attributable to retail and e-commerce sales volume growth for both the Atkins® and Quest® brands, which increased our North America net sales by 18.1% in the fifty-two weeks ended August 27, 2022 compared to the fifty-two weeks ended August 28, 2021.
The increase was primarily attributable to the price increase effective in the fourth quarter of fiscal year 2022, which drove growth of 6.6% in North America net sales for the fifty-two weeks ended August 26, 2023 compared to the fifty-two weeks ended August 27, 2022.
Depreciation and amortization expenses increased $0.3 million, or 1.8%, for the fifty-two weeks ended August 27, 2022 compared to the fifty-two weeks ended August 28, 2021, primarily due to increased depreciation expense related to the $5.2 million of purchases of property and equipment during the fifty-two weeks ended August 27, 2022. Interest income.
Depreciation and amortization expenses were $17.4 million and $17.3 million for the fifty-two weeks ended August 26, 2023 compared to the fifty-two weeks ended August 27, 2022, respectively. Interest income.
Cost of goods sold increased $127.3 million, or 21.4%, for the fifty-two weeks ended August 27, 2022 compared to the fifty-two weeks ended August 28, 2021. The cost of goods sold increase was driven by sales volume growth for both the Atkins® and Quest® brands, as discussed above.
Cost of goods sold increased $66.1 million, or 9.1%, for the fifty-two weeks ended August 26, 2023 compared to the fifty-two weeks ended August 27, 2022. The cost of goods sold increase was primarily driven by higher raw material, packaging and logistics costs. Gross profit.
As previously discussed above in “Business Trends,” we expect these cost pressures and supply chain challenges to continue into fiscal year 2023. In assessing the performance of our business, we consider a number of key performance indicators used by management and typically used by our competitors, including the non-GAAP measures EBITDA and Adjusted EBITDA.
In assessing the performance of our business, we consider a number of key performance indicators used by management and typically used by our competitors, including the non-GAAP measures EBITDA and Adjusted EBITDA. Because not all companies use identical calculations, this presentation of EBITDA and Adjusted EBITDA may not be comparable to other similarly titled measures of other companies.
The outstanding balance of the Term Facility is due upon its maturity in July 2024.
The outstanding balance of the Term Facility is due upon its maturity in March 2027. As of August 26, 2023, there were no amounts drawn against the Revolving Credit Facility.
Additionally, we instituted price increases effective in the first and fourth quarters of fiscal year 2022. The increase in net sales was partially offset by a 23.8% decline in our international business due to the decision to wind down our European business. The European exit represented a 1.2% headwind to total net sales growth. Cost of goods sold.
The increase in North America net sales was partially offset by a 3.8% decline in our international business and a 0.6% headwind to net sales growth related to our shift from direct sales to licensing the Quest® frozen pizza business in the third quarter of fiscal year 2022. Cost of goods sold.
Gross profit increased $35.8 million, or 8.7%, for the fifty-two weeks ended August 27, 2022 compared to the fifty-two weeks ended August 28, 2021, which was primarily driven by the sales volume growth for both the Quest® and Atkins® brands as discussed above.
Gross profit of $453.4 million increased $7.9 million, or 1.8%, for the fifty-two weeks ended August 26, 2023 compared to the fifty-two weeks ended August 27, 2022.
These decreases in cash provided by operating activities were partially offset by the $29.1 million increase in income from operations to $202.8 million for the fifty-two weeks ended August 27, 2022 as compared to $173.7 million for the fifty-two weeks ended August 28, 2021, primarily attributable to retail and e-commerce sales volume growth for both the Atkins® and Quest® brands as discussed in “Results of Operations” above.
This cash consumption offset income from operations, which increased by $2.1 million to $204.9 million for the fifty-two weeks ended August 26, 2023 as compared to $202.8 million for the fifty-two weeks ended August 27, 2022, primarily attributable to net sales growth in North America.
We recorded a $5.0 million gain on a legal settlement during the fifty-two weeks ended August 28, 2021. Gain (loss) on foreign currency transactions. Foreign currency transactions resulted in a $0.2 million gain and an immaterial loss for the fifty-two weeks ended August 27, 2022 and August 28, 2021, respectively.
On January 7, 2022, the Private Warrants were exercised on a cashless basis, resulting in a net issuance of 4,830,761 shares of our common stock. (Loss) gain on foreign currency transactions. Foreign currency transactions resulted in an immaterial loss and an immaterial gain for the fifty-two weeks ended August 26, 2023 and August 27, 2022, respectively.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeHowever, there can be no assurance that the price increases will fully offset the effects of higher raw material and supply and distribution costs on our results of operations and financial condition.
Biggest changeHowever, there can be no assurance that the price increases will fully offset the effects of higher raw material, packaging, supply and distribution costs on our results of operations and financial condition. Refer to Item 1A, Risk Factors, for additional discussion of our risks associated with the costs of our raw materials, our supply chain, and inflation. Interest rate risk.
As a result, we have instituted price increases effective in the first and fourth quarters of fiscal year 2022. Management believes these price increases and additional cost savings initiatives will enable us to continue to invest in projects that drive growth.
As a result, we instituted price increases effective in the first and fourth quarters of fiscal year 2022. Management believes these price increases and additional cost savings initiatives will enable us to continue to invest in projects that drive growth.
Based on the amount outstanding of the Term Facility at the end of fiscal year 2022, a 1% increase in interest rates would increase our annual interest expense by approximately $4.1 million. Foreign currency risk. We are exposed to changes in currency rates as a result of investments in foreign operations and revenue generated in currencies other than the U.S.
Based on the amount outstanding of the Term Facility at the end of fiscal year 2023, a 1% increase in interest rates would increase our annual interest expense by approximately $2.9 million. Foreign currency risk. We are exposed to changes in currency rates as a result of investments in foreign operations and revenue generated in currencies other than the U.S.
We expect these cost pressures and supply chain challenges to continue into fiscal year 2023. In addition, current or future governmental policies may increase the risk of inflation, which could further increase the costs of ingredients, packaging and finished goods for our business.
We expect these cost pressures and supply chain challenges to continue, but improve, during fiscal year 2024. In addition, current or future governmental policies may increase the risk of inflation, which could further increase the costs of ingredients, packaging and finished goods for our business.
Dollar. Revenue and profit generated by international operations will increase or decrease compared to prior periods as a result of changes in foreign currency exchange rates. Historically, our foreign currency risk has primarily related to our operations in Canada, which were largely related to the SimplyProtein brand.
Dollar. Revenue and profit generated by international operations will increase or decrease compared to prior periods as a result of changes in foreign currency exchange rates. Historically, our foreign currency risk has primarily related to our operations in Canada, which were largely related to a brand we sold in September 2020.
During the fifty-two weeks ended August 27, 2022, our gross margins and profitability were negatively affected by higher raw material costs, higher freight and logistics costs, and supply chain challenges, including supply chain disruptions resulting from labor shortages as well as disruptions in ingredients, caused, in part, by the COVID-19 pandemic, the uncertain economic environment, and macroeconomic and geopolitical events and trends.
During the fifty-two weeks ended August 26, 2023, our gross margins and profitability were negatively affected by higher raw material, packaging, freight and logistics costs, and supply chain challenges, including supply chain disruptions resulting from labor shortages as well as disruptions in ingredients, caused, in part, by the uncertain economic environment, and macroeconomic and geopolitical events and trends.
Interest rate changes do not affect the market value of such debt, but could affect the amount of our interest payments, and accordingly, our future earnings and cash flows, assuming other factors are held constant. As of August 27, 2022, the outstanding balance of the Term Facility was $406.5 million.
Interest rate changes do not affect the market value of such debt, but could affect the amount of our interest payments, and accordingly, our future earnings and cash flows, assuming other factors are held constant. As of August 26, 2023, the outstanding balance of the Term Facility was $285 million.
With the SimplyProtein Sale in September 2020 as well as the restructuring-related business activities in Europe, we have mitigated some of our risk of exposure to changes in foreign currency rates. 50
With this sale transaction, as well as the restructuring-related business activities in Europe, we have mitigated some of our risk of exposure to changes in foreign currency rates. 45
Derivative financial instruments, such as interest rate swap agreements and interest rate cap agreements, may be used for the purpose of managing fluctuating interest rate exposures that exist from our variable rate debt obligations that are expected to remain outstanding.
We are subject to interest rate risk in connection with borrowing based on a variable interest rate. Derivative financial instruments, such as interest rate swap agreements and interest rate cap agreements, may be used for the purpose of managing fluctuating interest rate exposures that exist from our variable rate debt obligations that are expected to remain outstanding.
Removed
Refer to Item 1A, Risk Factors, for additional discussion of our risks associated with the costs of our raw materials, our supply chain, and our risks associated with pandemics, epidemics or disease outbreaks, such as COVID-19. Interest rate risk. We are subject to interest rate risk in connection with borrowing based on a variable interest rate.

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