The Simply Good Foods pany(SMPL) - 2021 Q2 - Quarterly Report

PART I. Financial Information Comprehensive financial data including statements, notes, and management's analysis of performance and liquidity Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations and comprehensive income, cash flows, stockholders' equity, and detailed notes, providing a snapshot of the company's financial position and performance for the reported periods Condensed Consolidated Balance Sheets Presents the company's financial position with assets, liabilities, and equity at specific dates Condensed Consolidated Balance Sheets (Unaudited, dollars in thousands): | Category | February 27, 2021 | August 29, 2020 | | :-------------------------- | :---------------- | :---------------- | | Cash and cash equivalents | $91,307 | $95,847 | | Accounts receivable, net | $97,329 | $89,740 | | Inventories | $82,771 | $59,085 | | Total current assets | $289,134 | $260,263 | | Total assets | $2,021,518 | $2,008,445 | | Accounts payable | $43,585 | $32,240 | | Total current liabilities | $80,560 | $71,478 | | Long-term debt, less current maturities | $548,884 | $596,879 | | Total liabilities | $742,860 | $775,474 | | Total stockholders' equity | $1,278,658 | $1,232,971 | | Total liabilities and stockholders' equity | $2,021,518 | $2,008,445 | Condensed Consolidated Statements of Operations and Comprehensive Income Details the company's revenues, expenses, and net income over specific periods Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited, dollars in thousands, except share and per share data): | Metric | Thirteen Weeks Ended Feb 27, 2021 | Thirteen Weeks Ended Feb 29, 2020 | Twenty-Six Weeks Ended Feb 27, 2021 | Twenty-Six Weeks Ended Feb 29, 2020 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :---------------------------------- | :---------------------------------- | | Net sales | $230,607 | $227,101 | $461,759 | $379,254 | | Gross profit | $90,265 | $85,394 | $184,306 | $147,600 | | Income from operations | $33,341 | $25,269 | $72,528 | $22,284 | | Net income | $19,120 | $10,657 | $41,620 | $5,864 | | Basic EPS | $0.20 | $0.11 | $0.43 | $0.06 | | Diluted EPS | $0.19 | $0.11 | $0.41 | $0.06 | Condensed Consolidated Statements of Cash Flows Summarizes cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (Unaudited, dollars in thousands): | Activity | Twenty-Six Weeks Ended Feb 27, 2021 | Twenty-Six Weeks Ended Feb 29, 2020 | | :-------------------------------- | :---------------------------------- | :---------------------------------- | | Net cash provided by (used in) operating activities | $39,764 | $(14,886) | | Net cash provided by (used in) investing activities | $5,237 | $(985,932) | | Net cash (used in) provided by financing activities | $(49,893) | $780,705 | | Net decrease in cash | $(4,892) | $(220,113) | | Cash and cash equivalents at end of period | $91,307 | $46,115 | Condensed Consolidated Statements of Stockholders' Equity Outlines changes in equity components, including common stock, retained earnings, and paid-in capital Condensed Consolidated Statements of Stockholders' Equity (Unaudited, dollars in thousands): | Category | Balance at Aug 29, 2020 | Net Income (Aug-Nov 2020) | Net Income (Dec-Feb 2021) | Balance at Feb 27, 2021 | | :-------------------------- | :---------------------- | :------------------------ | :------------------------ | :---------------------- | | Common Stock (Shares) | 95,751,845 | — | 30,810 | 95,856,715 | | Common Stock (Amount) | $958 | — | $1 | $959 | | Additional Paid-In Capital | $1,094,507 | $1,110 | $2,484 | $1,098,375 | | Retained Earnings | $140,530 | $22,500 | $19,120 | $182,150 | | Total Stockholders' Equity | $1,232,971 | $22,500 | $19,120 | $1,278,658 | Notes to Unaudited Condensed Consolidated Financial Statements The notes provide detailed information on the company's business, significant accounting policies, the Quest acquisition, revenue recognition, goodwill and intangibles, long-term debt, fair value measurements, income taxes, leases, commitments, stockholders' equity, earnings per share, stock-based compensation, and restructuring activities Note 1. Nature of Operations and Principles of Consolidation Describes the company's business, core brands, and accounting principles for interim financial reporting - The Simply Good Foods Company is a consumer-packaged food and beverage company focused on nutritious snacking with core brands Atkins® (low-carb) and Quest® (protein-rich, low sugar/carbs) Products are distributed primarily in North America across various retail channels and e-commerce[19][89] - The company's fiscal year ends on the last Saturday in August Interim financial statements are unaudited and prepared in accordance with GAAP and SEC rules[21][22] - COVID-19 continues to create uncertainty regarding its ultimate effect on the business, including potential supply chain disruptions, changes in customer operations, and shifts in consumer behavior, despite vaccine distribution and easing restrictions[23][96] Note 2. Summary of Significant Accounting Policies Details the company's adoption and evaluation of new accounting standards and their impact - The company adopted ASU 2016-13 (Credit Losses) and ASU 2018-13 (Fair Value Measurement) as of the first day of fiscal 2021, neither of which had a material effect on the consolidated financial statements[29][30] - The company is evaluating ASU 2019-12 (Income Taxes) and ASU 2020-10 (Codification Improvements), effective for fiscal years beginning after December 15, 2021 and 2020 respectively, and does not anticipate a material effect from their adoption[26][28] - The company will monitor ASU 2020-04 (Reference Rate Reform), applicable through December 31, 2022, and does not anticipate a material effect[27] Note 3. Business Combination Covers the acquisition of Quest Nutrition, its strategic rationale, and purchase price allocation - Simply Good Foods acquired Quest Nutrition, LLC on November 7, 2019, for a total net consideration of $986.8 million, funded by cash on hand, a public offering of common stock, and new term loan debt[31][33][137] - The acquisition aimed to expand the company's nutritious snacking platform with Quest's protein-rich, low-sugar/carb products[32] Final Purchase Price Allocation of Quest Acquisition (in thousands): | Category | Amount | | :-------------------------------- | :------- | | Total identifiable net assets | $912,295 | | Goodwill | $74,525 | | Total assets acquired and liabilities assumed | $986,820 | - Quest's operations have been included in the Company's financial statements since November 7, 2019 Net sales from Quest were $105.0 million for the thirteen weeks ended Feb 27, 2021, and $200.8 million for the twenty-six weeks ended Feb 27, 2021[37] Note 4. Revenue Recognition Provides disaggregated net sales data by geographic area and core brands Disaggregated Net Sales by Geographic Area and Core Brands (in thousands): | Category | 13 Weeks Ended Feb 27, 2021 | 13 Weeks Ended Feb 29, 2020 | 26 Weeks Ended Feb 27, 2021 | 26 Weeks Ended Feb 29, 2020 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Atkins (North America) | $114,155 | $131,435 | $236,916 | $259,247 | | Quest (North America) | $105,025 | $88,305 | $200,794 | $105,387 | | Total North America | $219,180 | $219,740 | $437,710 | $364,634 | | International | $11,427 | $7,361 | $24,049 | $14,620 | | Total Net Sales | $230,607 | $227,101 | $461,759 | $379,254 | Note 5. Goodwill and Intangibles Details changes in goodwill and intangible assets, including amortization expense and the SimplyProtein Sale - Goodwill decreased by $1.6 million from August 29, 2020, to February 27, 2021, primarily due to a $2.8 million disposal related to the SimplyProtein Sale, partially offset by a $1.2 million measurement period adjustment for the Quest acquisition[40][41] - The SimplyProtein® brand assets were sold for approximately $8.8 million, including cash of $5.8 million and a note receivable for $3.0 million, resulting in no recognized gain or loss[41][99] Intangible Assets, Net (in thousands): | Category | Feb 27, 2021 Net Carrying Amount | Aug 29, 2020 Net Carrying Amount | | :-------------------------------- | :--------------------------------- | :--------------------------------- | | Brands and trademarks (indefinite) | $974,000 | $979,000 | | Customer relationships (15 years) | $149,697 | $155,497 | | Proprietary recipes and formulas (7 years) | $3,369 | $3,869 | | Licensing agreements (14 years) | $16,294 | $17,080 | | Software and website development costs (3-5 years) | $2,624 | $3,322 | | Intangible assets in progress (3-5 years) | $55 | — | | Total Intangible Assets, Net | $1,146,039 | $1,158,768 | - Amortization expense for intangible assets was $3.9 million for the thirteen weeks ended Feb 27, 2021, and $7.7 million for the twenty-six weeks ended Feb 27, 2021[43] Note 6. Long-Term Debt and Line of Credit Outlines the company's credit facilities, outstanding debt, and compliance with financial covenants - The company's Credit Agreement includes a $200.0 million Term Facility (drawn in full) and a $75.0 million Revolving Credit Facility (undrawn as of Feb 27, 2021)[46][51] - The Term Facility was increased by $460.0 million on November 7, 2019, to partially finance the Quest acquisition, with an interest rate of LIBOR plus 3.75% or base rate plus 2.75%[48][131][132] - As of February 27, 2021, the outstanding balance of the Term Facility was $556.5 million, due upon its maturity in July 2024 The company was in compliance with all financial covenants[51][134] Long-Term Debt (in thousands): | Category | Feb 27, 2021 | Aug 29, 2020 | | :-------------------------------- | :----------- | :----------- | | Term Facility | $556,500 | $606,500 | | Finance lease liabilities | $826 | $922 | | Less: Deferred financing fees | $(8,164) | $(10,272) | | Total debt | $549,162 | $597,150 | Note 7. Fair Value of Financial Instruments Explains the fair value hierarchy and valuation methods for financial instruments - The company uses a three-tier fair value hierarchy (Level 1, 2, 3) for financial instruments The Term Loan's fair value is estimated using observable inputs and classified as Level 2[54][55][56][53] - Carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable approximated fair value as of February 27, 2021 and August 29, 2020 due to their relatively short maturity[56] Note 8. Income Taxes Presents income tax expense and effective tax rates for the reported periods Income Tax Expense and Effective Tax Rate (in thousands): | Category | 26 Weeks Ended Feb 27, 2021 | 26 Weeks Ended Feb 29, 2020 | | :-------------------- | :-------------------------- | :-------------------------- | | Income before income taxes | $57,307 | $8,057 | | Income tax expense | $15,687 | $2,193 | | Effective tax rate | 27.4% | 27.2% | - The effective tax rate for the twenty-six weeks ended February 27, 2021, was 0.2% greater than the prior year, primarily driven by permanent differences[57] Note 9. Leases Details total lease costs, lease assets, and liabilities, including impairment charges Total Lease Cost (in thousands): | Category | 13 Weeks Ended Feb 27, 2021 | 13 Weeks Ended Feb 29, 2020 | 26 Weeks Ended Feb 27, 2021 | 26 Weeks Ended Feb 29, 2020 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Operating lease cost | $1,874 | $1,867 | $3,770 | $2,983 | | Short term lease cost | — | $18 | — | $24 | | Finance lease cost | $80 | $82 | $161 | $168 | | Total lease cost | $1,954 | $1,967 | $3,931 | $3,175 | - The company incurred impairment charges of $0.7 million and a gain on lease termination of $0.2 million for the twenty-six weeks ended February 27, 2021, related to restructuring activities in Toronto and the Netherlands[58][84] Lease Assets and Liabilities (in thousands): | Category | Feb 27, 2021 | Aug 29, 2020 | | :-------------------------------- | :----------- | :----------- | | Operating lease right-of-use assets | $23,089 | $25,703 | | Finance lease right-of-use assets | $776 | $912 | | Total lease assets | $23,865 | $26,615 | | Operating lease liabilities (current) | $4,235 | $4,329 | | Finance lease liabilities (current) | $278 | $271 | | Operating lease liabilities (long-term) | $20,880 | $22,764 | | Finance lease liabilities (long-term) | $548 | $651 | | Total lease liabilities | $25,941 | $28,015 | Note 10. Commitments and Contingencies Addresses potential legal matters, reserves, and contractual obligations like endorsement contracts - The company is not currently a party to any material litigation and is unaware of any pending or threatened litigation that could have a material adverse effect on its business, operating result, financial condition or cash flows[62][151] - As of February 27, 2021, the company had $0.7 million reserved for potential settlements, down from $1.3 million as of August 29, 2020[64] - The company has entered into endorsement contracts with celebrity figures and social media influencers, requiring payments of $2.8 million over the next year[65] Note 11. Stockholders' Equity Covers public equity offerings, outstanding warrants, and stock repurchase programs - On October 9, 2019, the company completed a public offering of 13,379,205 shares of common stock at $26.35 per share, generating net proceeds of approximately $350.0 million, used to partially fund the Quest acquisition[66][135] - 6,700,000 private placement warrants to purchase common stock remain outstanding as of February 27, 2021[67][138] - A $50.0 million stock repurchase program was adopted on November 13, 2018, with approximately $47.9 million remaining available as of February 27, 2021 No shares were repurchased during the twenty-six weeks ended February 27, 2021 or February 29, 2020[68][69] Note 12. Earnings Per Share Provides basic and diluted earnings per share calculations and related data Basic and Diluted Earnings Per Share (in thousands, except per share data): | Category | 13 Weeks Ended Feb 27, 2021 | 13 Weeks Ended Feb 29, 2020 | 26 Weeks Ended Feb 27, 2021 | 26 Weeks Ended Feb 29, 2020 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income | $19,120 | $10,657 | $41,620 | $5,864 | | Weighted average common shares - basic | 95,734,591 | 95,339,489 | 95,712,057 | 92,524,061 | | Basic earnings per share | $0.20 | $0.11 | $0.43 | $0.06 | | Weighted average common shares - diluted | 101,152,896 | 100,336,571 | 100,604,137 | 97,597,614 | | Diluted earnings per share | $0.19 | $0.11 | $0.41 | $0.06 | Note 13. Omnibus Incentive Plan Details stock-based compensation expense and unrecognized compensation costs for various equity awards - Stock-based compensation expense was $2.5 million for the thirteen weeks ended February 27, 2021, and $3.6 million for the twenty-six weeks ended February 27, 2021[75] - As of February 27, 2021, total unrecognized compensation cost for stock options was $3.5 million (weighted average period of 1.9 years), for restricted stock units was $7.6 million (2.2 years), for performance stock units was $4.4 million (1.6 years), and for SARs was $0.2 million (1.7 years)[76][77][79][81] Note 14. Restructuring and Related Charges Explains restructuring activities for Quest integration, incurred costs, and future projections - In May 2020, the company initiated restructuring activities to integrate Quest, involving workforce reductions, management structure changes, and the relocation of business activities[82][97] - For the twenty-six weeks ended February 27, 2021, the company incurred $3.8 million in restructuring and related costs, primarily termination benefits and severance[84][98] - Total restructuring and related costs incurred since May 2020 amount to $9.3 million, with an expected total of approximately $10.0 million to be paid throughout fiscal 2021 and the first quarter of fiscal 2022[85][98] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition, results of operations, and cash flows for the thirteen and twenty-six weeks ended February 27, 2021, compared to the prior year periods, including the impact of the Quest acquisition, COVID-19, and restructuring activities Overview Introduces the company's business model and the strategic acquisition of Quest Nutrition - The Simply Good Foods Company is a consumer-packaged food and beverage company focused on nutritious snacking with core brands Atkins® and Quest®[89] - The company completed the acquisition of Quest Nutrition, LLC in November 2019 for approximately $1.0 billion, aiming to lead the nutritious snacking movement[90] Effects of COVID-19 Discusses the ongoing impact of COVID-19 on consumer behavior, brand performance, and business uncertainty - COVID-19 continues to impact consumer shopping and consumption behavior, leading to decreased shopping trips and fewer on-the-go usage occasions, particularly affecting the nutrition and protein bar segments of both Atkins and Quest brands[95] - The Atkins brand's performance has remained slower due to what the company believes is temporary softer interest in weight management for consumers, fewer on-the-go usage occasions, and weakness in the mass channel, while the Quest brand has outperformed its portion of the nutritious snacking segment[95] - The company remains uncertain of the ultimate effect of COVID-19, citing potential for continued high case rates, mutations, unexpected supply chain disruptions, changes to customer operations, and shifts in consumer purchasing behavior[96] Restructuring and Related Charges Summarizes costs and projections for restructuring activities related to Quest integration - Restructuring activities, initiated in May 2020 for Quest integration, resulted in $1.3 million and $3.8 million in costs for the thirteen and twenty-six weeks ended February 27, 2021, respectively[97][98] - Total restructuring and related costs are projected to be approximately $10.0 million, with $9.3 million incurred as of February 27, 2021[98] SimplyProtein Sale Details the sale of the SimplyProtein® brand assets to focus on core brands - The company sold its SimplyProtein® brand assets for approximately $8.8 million on September 24, 2020, to focus resources on core Atkins® and Quest® brands No gain or loss was recognized[99] Key Financial Definitions Defines key financial terms such as net sales, cost of goods sold, and operating expenses - Net sales consist primarily of product sales less the cost of promotional activities, slotting fees, and other sales credits and adjustments[100] - Cost of goods sold includes costs paid to contract manufacturers for raw ingredients, packaging, shipping and handling, warehousing, depreciation of warehouse equipment, and tolling charges[101] - Operating expenses are comprised of selling and marketing, general and administrative, depreciation and amortization, and business transaction costs[102][104] Results of Operations Analyzes the company's financial performance for the reported periods, including sales, profit, and expenses Comparison of Unaudited Results for the Thirteen Weeks Ended February 27, 2021 and the Thirteen Weeks Ended February 29, 2020 For the thirteen weeks ended February 27, 2021, the company reported a 1.5% increase in net sales, a 5.7% increase in gross profit, and a significant 79.4% increase in net income, primarily driven by Quest brand growth, reduced operating expenses, and lower interest expense Key Financial Highlights (13 Weeks Ended, in thousands): | Metric | Feb 27, 2021 | Feb 29, 2020 | Change ($) | Change (%) | | :-------------------------- | :----------- | :----------- | :--------- | :--------- | | Net sales | $230,607 | $227,101 | $3,506 | 1.5% | | Gross profit | $90,265 | $85,394 | $4,871 | 5.7% | | Gross profit margin | 39.1% | 37.6% | 1.5 pp | | | Total operating expenses | $56,924 | $60,125 | $(3,201) | (5.3)% | | Income from operations | $33,341 | $25,269 | $8,072 | 32.0% | | Net income | $19,120 | $10,657 | $8,463 | 79.4% | | Adjusted EBITDA | $42,644 | $41,731 | $913 | 2.2% | - Net sales growth was primarily driven by Quest brand net sales growth and solid e-commerce growth across both the Atkins and Quest brands, partially offset by the SimplyProtein Sale, European restructuring, seasonal inventory timing, and higher trade promotions[105] - Gross profit margin improved by 150 basis points, mainly due to the absence of a $5.1 million non-cash inventory purchase accounting step-up adjustment in fiscal year 2020, partially offset by higher trade promotions in fiscal year 2021[107] - Operating expenses decreased due to lower selling and marketing expenses (SimplyProtein Sale, European restructuring) and reduced general and administrative expenses (Quest integration costs), despite increased restructuring charges[108][114] Comparison of Unaudited Results for the Twenty-Six Weeks Ended February 27, 2021 and the Twenty-Six Weeks Ended February 29, 2020 For the twenty-six weeks ended February 27, 2021, the company achieved a 21.8% increase in net sales, a 24.9% increase in gross profit, and a substantial 610.0% increase in net income, primarily due to the full inclusion and growth of the Quest brand and reduced business transaction costs Key Financial Highlights (26 Weeks Ended, in thousands): | Metric | Feb 27, 2021 | Feb 29, 2020 | Change ($) | Change (%) | | :-------------------------- | :----------- | :----------- | :--------- | :--------- | | Net sales | $461,759 | $379,254 | $82,505 | 21.8% | | Gross profit | $184,306 | $147,600 | $36,706 | 24.9% | | Gross profit margin | 39.9% | 38.9% | 1.0 pp | | | Total operating expenses | $111,778 | $125,316 | $(13,538) | (10.8)% | | Income from operations | $72,528 | $22,284 | $50,244 | 225.5% | | Net income | $41,620 | $5,864 | $35,756 | 610.0% | | Adjusted EBITDA | $91,341 | $73,526 | $17,815 | 24.2% | - Net sales increased primarily due to the Quest brand's partial inclusion in fiscal year 2020 compared to fiscal year 2021, as well as post-acquisition Quest brand sales volume growth, partially offset by decreased sales volume from the SimplyProtein Sale, European restructuring, COVID-19 related movement restrictions, and higher trade promotions[115] - Gross profit margin improved by 100 basis points, mainly due to the effect of the $7.5 million non-cash inventory step-up related to the Acquisition of Quest in fiscal year 2020, offset by higher trade promotions in fiscal year 2021[117] - Operating expenses decreased significantly due to the absence of $26.9 million in business transaction costs related to the Quest acquisition in the prior year, partially offset by increased selling and marketing, general and administrative (including restructuring charges), and depreciation and amortization expenses[118][124] Reconciliation of Adjusted EBITDA Provides a reconciliation of net income to Adjusted EBITDA, a non-GAAP financial measure - Adjusted EBITDA is a non-GAAP financial measure used to reflect the operating results of ongoing operations, defined as net income adjusted for interest, tax, depreciation, amortization, business transaction costs, stock-based compensation expense, inventory step-up, integration costs, restructuring costs, non-core legal costs, and other non-core expenses[125] Adjusted EBITDA Reconciliation (in thousands): | Metric | 13 Weeks Ended Feb 27, 2021 | 13 Weeks Ended Feb 29, 2020 | 26 Weeks Ended Feb 27, 2021 | 26 Weeks Ended Feb 29, 2020 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income | $19,120 | $10,657 | $41,620 | $5,864 | | EBITDA | $38,936 | $29,677 | $82,692 | $29,270 | | Business transaction costs | — | $694 | — | $26,853 | | Stock-based compensation expense | $2,484 | $2,122 | $3,594 | $3,795 | | Inventory step-up | — | $5,085 | — | $7,522 | | Integration of Quest | $968 | $3,903 | $2,214 | $5,341 | | Restructuring | $1,267 | — | $3,786 | — | | Non-core legal costs | — | $76 | — | $555 | | Other | $(1,011) | $174 | $(945) | $190 | | Adjusted EBITDA | $42,644 | $41,731 | $91,341 | $73,526 | Liquidity and Capital Resources The company maintains sufficient liquidity through cash flow from operations and credit facilities, with $91.3 million in cash as of February 27, 2021 It continues to manage debt, having made a $50.0 million principal payment on its Term Facility, and may opportunistically issue debt or equity Overview Describes the company's funding sources, principal uses of cash, and current liquidity position - The company has historically funded operations with cash flow from operations and, when needed, with borrowings under its credit facilities, with principal uses being debt service, working capital, and the Acquisition of Quest[127] - As of February 27, 2021, cash and cash equivalents totaled $91.3 million, which the company believes will be sufficient to finance continued operations and growth for at least the next twelve months[128] Debt and Credit Facilities Details the company's credit agreement, outstanding debt, and compliance with covenants - The company's Credit Agreement includes a $200.0 million Term Facility and a $75.0 million Revolving Credit Facility, with the Term Facility increased by $460.0 million in November 2019 to partially finance the Quest acquisition[129][131] - As of February 27, 2021, the Term Facility had an outstanding balance of $556.5 million, maturing in July 2024, and the Revolving Credit Facility had no amounts drawn The company was in compliance with all financial covenants[134] Public Equity Offering Summarizes the net proceeds and purpose of the October 2019 public equity offering - In October 2019, a public offering of 13,379,205 common shares generated approximately $350.0 million in net proceeds, used to partially finance the Quest acquisition[135] Acquisition of Quest Recaps the funding and strategic rationale behind the Quest acquisition - The Quest acquisition was completed on November 7, 2019, for approximately $1.0 billion, funded by cash on hand, equity offering proceeds, and new term loan debt[136][137] Equity Warrants States the number of outstanding private placement warrants to purchase common stock - 6,700,000 private placement warrants to purchase common stock remain outstanding[138] Cash Flows Analyzes major sources and uses of cash from operating, investing, and financing activities Major Sources and Uses of Cash (26 Weeks Ended, in thousands): | Category | Feb 27, 2021 | Feb 29, 2020 | | :-------------------------------- | :----------- | :----------- | | Net cash provided by (used in) operating activities | $39,764 | $(14,886) | | Net cash provided by (used in) investing activities | $5,237 | $(985,932) | | Net cash (used in) provided by financing activities | $(49,893) | $780,705 | - Operating cash flow significantly improved to $39.8 million provided in 2021 from $14.9 million used in 2020, driven by higher income before taxes (Quest growth) and reduced cash outlays for Quest acquisition-related costs[139] - Investing activities shifted from $985.9 million used in 2020 (Quest acquisition) to $5.2 million provided in 2021 (SimplyProtein Sale proceeds)[140] - Financing activities shifted from $780.7 million provided in 2020 (equity offering, term loan issuance) to $49.9 million used in 2021 (principal debt payment)[141] Contractual Obligations Confirms no material changes to contractual obligations since the Annual Report - There have been no material changes to contractual obligations (Credit Agreement, finance and operating leases) from the Annual Report[142] Off-Balance Sheet Arrangements States the absence of material off-balance sheet arrangements as of the reporting date - As of February 27, 2021, the company had no material off-balance sheet arrangements[143] New Accounting Pronouncements Refers to Note 2 for information on recently issued accounting standards and policy changes - There have been no significant changes to critical accounting policies since August 29, 2020 Refer to Note 2 for further information regarding recently issued accounting standards[144] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company experienced no material changes in market risk exposure during the thirteen weeks ended February 27, 2021, but is assessing alternatives to mitigate potential input cost inflation for fiscal year 2022 - There were no material changes in the company's market risk exposure during the thirteen week period ended February 27, 2021[145] - The company is observing some inflationary pressure on input costs and is assessing available alternatives to mitigate potential input cost inflation for fiscal year 2022[145] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of February 27, 2021, with no material changes in internal controls over financial reporting during the quarter - Management, including the Chief Executive Officer and Chief Financial Officer, concluded that the company's disclosure controls and procedures were effective as of February 27, 2021[147] - There were no changes in internal controls over financial reporting during the quarter ended February 27, 2021, that have materially affected, or are reasonably likely to materially affect, internal controls over financial reporting[148] PART II. Other Information Presents additional disclosures including legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings The company is not currently involved in any material legal proceedings and is unaware of any pending or threatened litigation that could significantly impact its business, operating results, financial condition, or cash flows - The company is not presently a party to any litigation that it believes to be material, and is not aware of any pending or threatened litigation against it that its management believes could have a material adverse effect on its business, operating result, financial condition or cash flows[151] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report, and readers should consider those factors, along with other unknown or immaterial risks, which could adversely affect the business - There have been no material changes in the company's risk factors included in its Annual Report[152] - Readers should carefully consider the factors discussed in Part I, Item 1A. "Risk Factors" in the Annual Report, as well as additional risks and uncertainties not currently known or deemed immaterial, which may materially adversely affect the business[152] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds to report for the period - None to report[153] Item 3. Defaults Upon Senior Securities No defaults upon senior securities to report for the period - None to report[154] Item 4. Mine Safety Disclosures Not applicable to the company's operations - Not Applicable[155] Item 5. Other Information No other information to report for the period - None to report[156] Item 6. Exhibits This section lists the exhibits filed as part of the Form 10-Q, including certifications and XBRL-related documents - Exhibits include certifications of Principal Executive Officer and Principal Financial Officer pursuant to Sections 302 and 906 of the Sarbanes Oxley Act of 2002, along with various XBRL (eXtensible Business Reporting Language) documents[158] Signatures The report is duly signed on behalf of The Simply Good Foods Company by Timothy A. Matthews, Vice President, Controller, and Chief Accounting Officer, on April 7, 2021 - The report was signed on behalf of The Simply Good Foods Company by Timothy A. Matthews, Vice President, Controller, and Chief Accounting Officer, on April 7, 2021[162]