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The Simply Good Foods Company Reports Fourth Quarter and Full Year Fiscal 2017 Financial Results
Denver, CO, November 8, 2017 - The Simply Good Foods Company (NASDAQ: SMPL, SMPL.W) (“Simply Good Foods,” or the “Company”), a developer, marketer and seller of branded nutritional foods and snacking products, today reported financial results for the fiscal 13 week fourth quarter and full year ended August 26, 2017.
“We ended fiscal year 2017 with strong net sales and profit growth. Our financial performance reflects continued solid momentum across sales channels and our nutritional snacking product categories,” commented Joseph E. Scalzo, President and Chief Executive Officer of Simply Good Foods. “Going forward, we remain confident we are well positioned to leverage our well-established brand and capitalize on our strategic growth initiatives to drive continued sales and profitability and create value for our shareholders.”
Results for the Successor Period July 7, 2017 to August 26, 2017 and Predecessor Period August 28, 2016 to July 6, 2017(1) 
Successor net sales were $56.3 million and Predecessor net sales were $339.8 million
Successor net income was $0.5 million and Predecessor net loss was $2.5 million
In order to present comparable financial information, the Company has also presented supplemental unaudited pro forma combined financial information for the quarters and years ended August 26, 2017 and August 27, 2016, giving effect to the business combination (the "Business Combination") with Conyers Park Acquisition Corp. ("Conyers Park") and NCP-ATK Holdings, Inc. ("Atkins") as if it had occurred on August 30, 2015. All references in this press release to results for the quarter and year ended August 26, 2017, refer to such unaudited pro forma combined results. The Company believes this pro forma information provides helpful supplemental information with respect to the performance of Simply Good Foods, and particularly the Atkins business, during this period.
Fourth Quarter 2017 Pro Forma Combined Financial Highlights
Pro forma combined net sales increased 10.3%, or $9.1 million, to $97.6 million
Pro forma combined gross profit margin of 48.6%, an increase of 220 bps
Pro forma combined net income increased 80.3% to $7.8 million, an increase of $3.5 million compared to the fourth quarter of 2016
Pro forma combined earnings per diluted share (“EPS”) of $0.11, an increase of $0.05 per fully diluted share
Pro forma combined Adjusted EBITDA(2) increased 3.6%, to $17.4 million.





________________________________________
(1) On July 7, 2017, the Company completed the Business Combination between Atkins and Conyers Park, and as a result of the Business Combination, both Conyers Park and Atkins became wholly-owned subsidiaries of Simply Good Foods. Pursuant to GAAP and SEC requirements and the application of acquisition accounting, the Company's consolidated financial results are presented: (i) as of and for the period July 7, 2017 to August 26, 2017 (Successor); (ii) as of and for the period August 28, 2016 to July 6, 2017 (Predecessor); and (iii) for the fiscal year ended August 27, 2016 (Predecessor). All references to “Successor” refers to Simply Good Foods, and all references to “Predecessor” refers to Atkins prior to the Business Combination.
(2) Adjusted EBITDA is a non-GAAP financial measure. Please refer to "Non-GAAP Financial Measure and Related Information" and "Reconciliation of Adjusted EBITDA" in this press release for an explanation and reconciliations of this non-GAAP financial measure.

1



Fiscal 2017 Pro Forma Combined Financial Highlights
Pro forma combined net sales increased 7.4%, or $27.1 million, to $396.2 million
Pro forma combined gross profit margin of 47.0%, an increase of 110 bps
Pro forma combined net income increased 34.8% to $28.7 million, an increase of $7.4 million compared to 2016
Pro forma combined EPS on a fully diluted basis of $0.40 per share, an increase of $0.10 per fully diluted share
Pro forma combined Adjusted EBITDA increased 12.9%, to $72.5 million
(All comparisons above are with respect to the Predecessor's pro forma fourth quarter and year ended August 27, 2016)
Fourth Quarter 2017 Pro Forma Combined Financial Results
Pro forma combined net sales increased $9.1 million, or 10.3%, to $97.6 million driven by core growth of 2.6%, the acquisition of Wellness Foods, Inc. and its Simply Protein brand which added 4.0% and a 3.7% benefit from a 2016 recall expense and corresponding reimbursement in 2017.
Pro forma combined gross profit was $47.4 million for the fourth quarter of 2017, an increase of $6.3 million or 15.3%. Pro forma combined gross profit margin was 48.6% compared to 46.4% for the 13 weeks ended August 27, 2016 driven primarily by the absence of the aforementioned recall expense, which accounted for 210 basis points of the gross margin expansion.
Pro forma combined net income increased $3.5 million or 80.3%, to $7.8 million. The increase was driven by above gross profit improvement, partially offset by a 13.1% increase in marketing spend and higher public company costs.
Pro forma combined Adjusted EBITDA, which is a non-GAAP financial measure used by the Company that makes certain adjustments to net income calculated under GAAP, increased 3.6% to $17.4 million.
Fiscal 2017 Pro Forma Combined Financial Results
Pro forma combined net sales increased $27.1 million, or 7.4%, to $396.2 million as a result of core growth of 4.6%, the acquisition of Wellness Foods, Inc. in December 2016 which contributed 1.9%, and the recall which added 0.9%.
Pro forma combined gross profit was $186.2 million for fiscal 2017, an increase of $16.7 million or 9.8% versus the prior year. Pro forma combined gross profit margin was 47.0% compared to 45.9% in fiscal 2016 driven by cost saving initiatives, favorable mix and the recall.
Pro forma combined net income increased $7.4 million, or 34.8%, to $28.7 million driven by the increase in gross profit, and operating expenses that grew slightly below net sales growth.
Pro forma combined Adjusted EBITDA increased 12.9% to $72.5 million.
Balance Sheet and Cash Flow
As of August 26, 2017, the Company had cash and cash equivalents of $56.5 million and a $200.0 million Term Loan outstanding, resulting in a pro forma combined Net Debt to Adjusted EBITDA ratio of 2.0x. The Company also has a $75.0 million revolving line of credit available for borrowing which is not currently being utilized, and which had no borrowings outstanding as of August 26, 2017.
Outlook
Simply Good Foods expects fiscal year 2018 net sales growth to be consistent with its previously stated long-term growth algorithm of 4% to 6%. The Company anticipates Adjusted EBITDA will grow at a slightly higher rate than net sales, including the impact of an incremental $2.0 million of public company expenses.

2



Conference Call and Webcast Information
The Company will host a conference call with members of the executive management team to discuss these results today, Wednesday, November 8, 2017 at 6:30 a.m. Mountain time (8:30 a.m. Eastern time). Investors interested in participating in the live call can dial 877-407-0792 from the U.S and International callers can dial 201-689-8263.
In addition, the call and supplementary presentation slides will be broadcast live over the Internet hosted at the “Investor Relations” section of the Company's website at http://www.thesimplygoodfoodscompany.com. The webcast will be archived for 30 days. A telephone replay will be available approximately two hours after the call concludes and will be available through Wednesday, November 22, 2017, by dialing 844-512-2921 from the U.S., or 412-317-6671 from international locations, and entering confirmation code 13671889.
About The Simply Good Foods Company
The Simply Good Foods Company, or “Simply Good Foods,” is the company created by the business combination of Conyers Park Acquisition Corp., with executive founders Jim Kilts and Dave West, long-time business leaders in the consumer products sector, and NCP-ATK Holdings, Inc. Today, our highly-focused product portfolio consists primarily of nutrition bars, ready-to-drink shakes, snacks and confectionery products marketed under the Atkins®, SimplyProtein®, Atkins Endulge®, and Atkins Harvest Trail brand names. Simply Good Foods will look to expand its platform through investment opportunities in the snacking space and broader food category. Over time, Simply Good Foods aspires to become a portfolio of brands that bring simple goodness, happiness and positive experiences to consumers and their families. For more information, please visit https://www.thesimplygoodfoodscompany.com.
Forward Looking Statements
Certain statements made herein are not historical facts but are forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. Forward-looking statements generally are accompanied by or include words such as “will”, “believe”, “expand”, “anticipate”, “growth” or the negative or other variations thereof and other similar words, phrases or expressions. These forward-looking statements include statements regarding future plans for the Company, the estimated or anticipated future results and benefits of the Company’s future plans and operations, future opportunities for the Company, and other statements that are not historical facts. These statements are based on the current expectations of the Company’s management and are not predictions of actual performance. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those described in the statements based on a number of factors, including but not limited to the following: changes in the business environment in which the Company operates including general financial, economic, regulatory and political conditions affecting the industry in which the Company operates; changes in consumer preferences and purchasing habits; the availability of or competition for other brands, assets or other opportunities for investment by the Company or to expand the Company’s business; changes in taxes, governmental laws, and regulations; competitive product and pricing activity; difficulties of managing growth profitably; the loss of one or more members of Company’s management teams; and other risk factors described from time to time in the Company’s Form 10-K, Form 10-Q, and Form 8-K reports (including all amendments to those reports) filed with the U.S. Securities and Exchange Commission from time to time. In addition, forward-looking statements provide the Company’s expectations, plans or forecasts of future events and views as of the date of this communication. Except as required by law, the Company undertakes no obligation to update such statements to reflect events or circumstances arising after such date, and cautions investors not to place undue reliance on any such forward-looking statements. These forward-looking statements should not be relied upon as representing the Company’s assessments as of any date subsequent to the date of this communication.

3



Non-GAAP Financial Measure and Related Information
This communication includes Adjusted EBITDA, a financial measure that is not prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The Company defines Adjusted EBITDA as net income (loss) before interest expense, income tax expense, depreciation and amortization with further adjustments to exclude the following items: stock-based compensation and warrant expense, transaction costs and IPO readiness, restructuring costs, management fees, transactional exchange impact and other onetime expenses. The Company believes that the inclusion of these supplementary adjustments in presenting Adjusted EBITDA are appropriate to provide additional information to investors and reflects more accurately operating results of the on-going operations. Adjusted EBITDA may not be comparable to other similarly titled captions of other companies due to differences in calculation. The Company's management believes that this non-GAAP measure of financial results provides useful information to management and investors regarding certain financial and business trends relating to the Company's financial condition and results of operations. You should review the reconciliation of the Company's non-GAAP financial measures to the comparable GAAP financial measures which are included in this press release, and not rely on any single financial measure to evaluate Atkins’ business.
Investor Contacts
Katie Turner/ Rachel Perkins
ICR
646-277-1228
Katie.turner@icrinc.com
Rachel.perkins@icrinc.com

4



The Simply Good Foods Company, and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands, except share data)
 
August 26, 2017
 
 
August 27, 2016
 
(Successor)
 
 
(Predecessor)
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
$
56,501

 
 
$
78,492

Accounts receivable, net
37,181

 
 
42,839

Inventories, net
29,062

 
 
27,544

Prepaid expenses
2,904

 
 
1,753

Other current assets
8,263

 
 
8,353

Total current assets
133,911

 
 
158,981


 
 
 
 
Long-term assets:
 
 
 
 
Property and equipment, net
2,105

 
 
2,273

Intangible assets, net
319,148

 
 
185,688

Goodwill
465,030

 
 
40,724

Other long term assets
2,294

 
 
1,846

Total assets
$
922,488

 
 
$
389,512


 
 
 
 
Liabilities and stockholders' equity (deficit)
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
$
14,859

 
 
$
18,750

Accrued interest
561

 
 
4,028

Accrued expenses and other current liabilities
15,042

 
 
16,629

Current portion of TRA liability
2,548

 
 

Current maturities of long-term debt
234

 
 
11,387

Total current liabilities
33,244

 
 
50,794


 
 
 
 
Long-term liabilities:
 
 
 
 
Long-term debt, less current maturities
191,856

 
 
321,638

Warrant liabilities

 
 
15,722

Long term portion of TRA liability
23,127

 
 

Deferred income taxes
75,559

 
 
29,192

Total liabilities
323,786

 
 
417,346

See commitments and contingencies (Note 10)


 
 



 
 
 
 
Stockholders' equity (deficit):
 
 
 
 
Preferred stock (Successor), $0.01 par value, 100,000,000 shares authorized, none issued

 
 

Common stock (Successor), $0.01 par value, 600,000,000 shares authorized, 70,628,322 issued and outstanding
706

 
 

Common stock (Predecessor), $0.01 par value, 600,000 shares authorized, 508,132 issued and outstanding

 
 
5

Additional paid-in-capital
610,138

 
 
(43,551)

(Accumulated deficit) Retained earnings
(12,161
)
 
 
16,155

Accumulated other comprehensive income (loss)
19

 
 
(443)

Total stockholders' equity (deficit)
598,702

 
 
(27,834)

Total liabilities and stockholders' equity (deficit)
$
922,488

 
 
$
389,512


5



The Simply Good Foods Company, and Subsidiaries
Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
(Dollars in thousands, except share data)
 
2017
 
2016
 
From July 7, 2017
through August 26, 2017
 
 
From August 28, 2016
through July 6, 2017
 
52-weeks ended
 
 
 
 
August 27, 2016
 
(Successor)
 
 
(Predecessor)
 
(Predecessor)
Net sales
$
56,334

 
 
$
339,837

 
$
427,858

Cost of goods sold
35,941

 
 
179,998

 
248,464

Gross profit
20,393

 
 
159,839

 
179,394

 
 
 
 
 
 
 
Operating Expenses:
 
 
 
 
 
 
Distribution
2,784

 
 
14,970

 
18,489

Selling
2,322

 
 
13,905

 
18,513

Marketing
4,615

 
 
33,589

 
37,751

General and administrative
7,813

 
 
39,276

 
46,961

Depreciation and amortization
1,000

 
 
8,617

 
10,179

Business combination transaction costs

 
 
25,608

 

Other Expense

 
 
141

 
1,542

Total operating expenses
18,534

 
 
136,106

 
133,435

 
 
 
 
 
 
 
Income from operations
1,859

 
 
23,733

 
45,959

 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
Change in warrant liabilities

 
 
722

 
(722
)
Interest expense
(1,662
)
 
 
(22,724
)
 
(27,195
)
Loss (gain) on foreign currency transactions
513

 
 
133

 
(619
)
Other income (expense)
30

 
 
221

 
118

Total other expense
(1,119
)
 
 
(21,648
)
 
(28,418
)
 
 
 
 
 
 
 
Income (loss) before income taxes
740

 
 
2,085


17,541

Income tax expense (benefit)
290

 
 
4,570

 
7,507

Net income
$
450

 
 
$
(2,485
)
 
$
10,034

 
 
 
 
 
 
 
Other comprehensive income:
 
 
 
 
 
 
Foreign currency translation adjustments
19

 
 
(199
)
 
621

Comprehensive income
$
469

 
 
$
(2,684
)
 
$
10,655

 
 
 
 
 
 
 
Earnings per share from net income:
 
 
 
 
 
 
Basic
$
0.01

 
 
 
 
 
Diluted
$
0.01

 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
Basic
70,562,477

 
 
 
 
 
Diluted
71,254,770

 
 
 
 
 

6



The Simply Good Foods Company, and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in thousands)
 
2017
 
2016
 
From July 7, 2017
through August 26, 2017
 
 
From August 28, 2016
through July 6, 2017
 
52-weeks ended
 
 
 
 
August 27, 2016
 
(Successor)
 
 
(Predecessor)
 
(Predecessor)
Operating activities
 
 
 
 
 
 
Net income
$
450

 
 
$
(2,485
)
 
$
10,034

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
 
 
 
Depreciation and amortization
1,000

 
 
8,617

 
10,179

Amortization of deferred financing costs and debt discount
192

 
 
1,950

 
2,159

Stock compensation expense
412

 
 
2,441

 
2,104

Change in warrant liabilities

 
 
(722
)
 
722

Unrealized (gain) loss on foreign currency transactions
(513
)
 
 
(133
)
 
619

Deferred income taxes
(382
)
 
 
(3,880
)
 
5,505

Changes in operating assets and liabilities:
 
 
 
 
 
 
Accounts receivable, net
(5,556
)
 
 
14,447

 
(14,854
)
Inventories, net
4,130

 
 
1,912

 
6,078

Prepaid expenses
(1,107
)
 
 
36

 
(391
)
Other current assets
5,340

 
 
(10,548
)
 
(1,309
)
Accounts payable
2,089

 
 
(7,246
)
 
2,247

Accrued interest
561

 
 
(3,615
)
 
(211
)
Accrued expenses and other current liabilities
(34,096
)
 
 
21,459

 
6,029

Other
124

 
 
(294
)
 
112

Net cash provided by (used in) operating activities
(27,356
)

 
21,939

 
29,023

Investing activities
 
 
 
 
 
 
Purchases of property, plant, and equipment
(458
)
 
 
(498
)
 
(815
)
Acquisition of business, net of cash acquired
(600,825
)
 
 
(19,960
)
 

Cash withdrawn from trust account
403,979

 
 

 

Net cash provided by (used in) investing activities
(197,304
)
 
 
(20,458
)
 
(815
)
Financing activities
 
 
 
 
 
 
Proceeds from option exercises

 
 
109

 
326

Excess tax benefit from stock-based compensation

 
 
(59
)
 
403

Principal payments of long-term debt

 
 
(53,586
)
 
(7,464
)
Proceeds from issuance of private placement equity, net of issuance costs
97,000

 
 

 

Proceeds from issuance of long term debt, net of issuance costs
191,899

 
 

 

Payment of Conyers Park deferred equity issuance costs
(8,100
)
 
 

 

Net cash provided by (used in) financing activities
280,799

 
 
(53,536
)
 
(6,735
)
Cash and cash equivalents
 
 
 
 
 
 
Net increase (decrease) in cash
56,139

 
 
(52,055
)
 
21,473

Effect of exchange rate on cash
159

 
 
(10
)
 
(75
)
 
 
 
 
 
 
 
Cash at beginning of period
203

 
 
78,492

 
57,094

Cash and cash equivalents at end of period
$
56,501


 
$
26,427

 
$
78,492



7



Supplemental Pro Forma Combined 52-Week Period Ended August 26, 2017
For comparative purposes, we are presenting a supplemental unaudited pro forma combined statement of operations for the fifty two week period ended August 26, 2017, and we discuss such pro forma combined results compared to the Predecessor’s full year 2016 results below.
The unaudited pro forma combined statements of operations for the fiscal year ended August 26, 2017 presents our consolidated results of operations giving pro forma effect to the Business Combination as if it had occurred as of August 28, 2016. The pro forma combined adjustments are based on available information and upon assumptions that our management believes are reasonable in order to reflect, on a pro forma combined basis, the impact of these transactions on the historical financial information of our Predecessor and Successor entities, as applicable.
The Business Combination is accounted for using the acquisition method of accounting in accordance with the FASB Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”). ASC 805 requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values, as determined in accordance with ASC 820, Fair Value Measurements, as of the Business Combination date. Under the acquisition method of accounting, the assets acquired and liabilities assumed will be recorded at the effective time of the Business Combination at their respective fair values. ASC 805 establishes a measurement period to provide the Company with a reasonable amount of time to obtain the information necessary to identify and measure various items in a business combination and cannot extend beyond one year from the acquisition date.
The initial estimated fair values of the acquired assets and assumed liabilities as of the Closing Date, which are based on the consideration paid and our estimates and assumptions, are reflected herein. As explained in more detail in Note 3. Business Combinations in the notes to the Consolidated Financial Statements, the total purchase price to acquire Atkins has been allocated to the assets acquired and assumed liabilities, based upon preliminary estimated fair values at the Closing Date. We utilized third-party valuation specialists to assist our management in determining the fair values of the acquired assets and liabilities assumed. We have not finalized our assessment of the purchase consideration and estimated fair value of assets acquired and liabilities assumed as of August 26, 2017.
The unaudited pro forma combined financial information contains a variety of adjustments, assumptions and estimates, is subject to numerous other uncertainties and the assumptions and adjustments as described in the accompanying notes hereto and should not be relied upon as being indicative of our results of operations had the Business Combination occurred on August 28, 2016. The unaudited pro forma combined financial information also does not project our results of operations for any future period or date. The unaudited pro forma combined financial information for the 52-weeks ended August 26, 2017 includes results of the Successor and Predecessor entities. The pro forma combined adjustments give effect to the items identified in the pro forma combined table below in connection with the Business Combination.

8



Pro Forma Combined Statement of Operations
For the pro forma combined 52-week period ended August 26, 2017
(Unaudited)
(In thousands)
 
 
Historical (i)
 
 
 
 Pro Forma Combined
(Unaudited)
 
 
(Successor)
 
 
(Predecessor)
 
 
 
 
 
From July 7, 2017
through August 26, 2017
 
 
From August 28, 2016
through July 6, 2017
 
Pro Forma Adjustments
 
52-week ended
(In thousands)
 
 
 
 
 
August 26, 2017
Net sales
 
56,334

 
 
339,837

 

 
396,171

Cost of goods sold
 
35,941

 
 
179,998

 
(5,989
)
ii
209,950

Gross profit
 
20,393

 
 
159,839

 
5,989

 
186,221

 
 
 
 
 
 
 
 
 
 
Operating Expenses:
 
 
 
 
 
 
 
 
 
Distribution
 
2,784

 
 
14,970

 

 
17,754

Selling
 
2,322

 
 
13,905

 

 
16,227

Marketing
 
4,615

 
 
33,589

 

 
38,204

General and administrative
 
7,813

 
 
39,276

 
635

iii
47,724

Depreciation and amortization
 
1,000

 
 
8,617

 
(1,979
)
iv
7,638

Business combination transaction costs
 

 
 
25,608

 
(25,608
)
v

Other expense
 

 
 
141

 

 
141

Total operating expenses
 
18,534

 
 
136,106

 
(26,952
)
 
127,688

 
 
 
 
 
 
 
 
 
 
Income from operations
 
1,859

 
 
23,733

 
32,941

 
58,533

 
 
 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
 
 
Change in warrant liabilities
 

 
 
722

 
(722
)
vi

Interest expense
 
(1,662
)
 
 
(22,724
)
 
12,475

vii
(11,911
)
Loss (gain) on foreign currency transactions
 
513

 
 
133

 

 
646

Other income
 
30

 
 
221

 

 
251

Total other expense
 
(1,119
)
 
 
(21,648
)
 
11,753

 
(11,014
)
 
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
 
740

 
 
2,085

 
44,694

 
47,519

Income tax expense
 
290

 
 
4,570

 
13,958

viii
18,818

Net income (loss)
 
$
450

 
 
$
(2,485
)
 
$
30,736

 
$
28,701


9



i. The amounts presented represent the Successor’s and Predecessor’s historical GAAP results of operations.
ii. The adjustment represents a non-cash, one time inventory fair value adjustment recorded in conjunction with the Business Combination and was recognized in the successor period, and is not indicative of future cost of good sold.
iii. The adjustment represents the incremental stock based compensation expense incurred under the Simply Good Foods Omnibus Incentive Plan.
iv. The adjustment reflects the difference in the intangible asset amortization expense associated with the allocation of purchase price to intangible assets due to the Business Combination. The amortization expense decreased as more indefinite lived intangible assets were identified for the successor entity than the predecessor entity. The amount of amortizable intangible assets identified in the Business Combination decreased from $125.8 million to $88.0 million.
v. Business combination transaction expenses primarily consist of fees related to the Business Combination and the Company’s acquisition activities.
vi. Predecessor warrants were accounted for as warrant liabilities, which were exercised and settled with the Business Combination.
vii. Represents the adjustment necessary to arrive at the expected interest expense associated with the new term loan and revolving debt facilities of Simply Good Foods. The predecessor entity had $337.2 million outstanding as of August 27, 2016 while the successor entity had $200.0 million outstanding. The long term debt of the predecessor entity accrued interest at 6.25% on the first lien and 9.75% on the second lien while the successor debt accrues interest at 3 month LIBOR plus 4%. The significant reduction in outstanding principal, and lower interest rates, drive significant expense savings.
viii. Represents the adjustment necessary to arrive at an effective income tax rate of 39.6%.

10



Supplemental Pro Forma 52-Week Period Ended August 27, 2016
The following unaudited pro forma financial information has been prepared from the perspective of Atkins and its fiscal year end of August 27, 2016. The unaudited pro forma income statement for the fifty two weeks ended August 27, 2016 presents the historical consolidated statement of operations of Atkins for the fifty two weeks ended August 27, 2016, giving effect to the Business Combination as if it had occurred on August 30, 2015.
The unaudited pro forma financial statements give effect to the Business Combination in accordance with the acquisition method of accounting for business combinations. The historical financial information has been adjusted to give pro forma effect to events that are related and/or directly attributable to the Business Combination, are factually supportable and are expected to have a continuing impact on the results of the combined company. The adjustments presented on the unaudited pro forma financial statements have been identified and presented to provide relevant information necessary for an accurate understanding of the combined company upon consummation of the Business Combination.
The unaudited pro forma financial statements also reflect the impact of the Atkins license arrangement for frozen meals sold in the U.S. by Bellisio. This agreement was effective September 1, 2016 and is a seven-year license with Bellisio to license its frozen meals business. Bellisio manufactures, distributes, markets, promotes and sells Atkins frozen food products under the Atkins licensed mark. The effects of the license agreement are presented in the “Frozen License Adjustments” and “Atkins' Pro Forma” columns in the unaudited historical consolidated statement of operations for the fifty two weeks ended August 27, 2016.
The unaudited pro forma financial information is for illustrative purposes only. The financial results may have been different if the Business Combination actually been completed sooner. You should not rely on the unaudited pro forma financial information as being indicative of the historical results that would have been achieved if the Business Combination been completed as of August 30, 2015.

11



Pro Forma Statement of Operations
For the pro forma 52-week period ended August 27, 2016
(Unaudited)
(In thousands)
(In thousands)
Historical Atkins
 
Frozen License Adjustments
 
Atkins' Pro Forma (i)
 
Pro Forma Adjustments
 
Pro Forma (Unaudited)
Net sales
$
427,858

 
$
(58,819
)
 
$
369,039

 
$

 
$
369,039

Cost of goods sold
248,464

 
(48,977
)
 
199,487

 

 
199,487

Gross profit
179,394

 
(9,842
)
 
169,552

 

 
169,552

 
 
 
 
 
 
 
 
 
 
Operating Expenses:
 
 
 
 
 
 
 
 
 
Distribution
18,489

 
(3,023
)
vii
15,466

 

 
15,466

Selling
18,513

 
(2,440
)
vii
16,073

 

 
16,073

Marketing
37,751

 
(1,487
)
 
36,264

 

 
36,264

General and administrative
46,961

 
(2,897
)
 
44,064

 
1,384

ii
45,448

Depreciation and amortization
10,179

 

 
10,179

 
(2,587
)
iii
7,592

Other expense
1,542

 
(493
)
 
1,049

 

 
1,049

Total operating expenses
133,435

 
(10,340
)
 
123,095

 
(1,203
)
 
121,892

 
 
 
 
 
 
 
 
 
 
Income from operations
45,959

 
498

 
46,457

 
1,203

 
47,660

 

 

 

 

 

Other income (expense):
 
 
 
 
 
 
 
 

Change in warrant liabilities
(722
)
 

 
(722
)
 
722

iv

Interest expense
(27,195
)
 

 
(27,195
)
 
15,284

v
(11,911
)
Loss (gain) on foreign currency transactions
(619
)
 

 
(619
)
 

 
(619
)
Other income
118

 

 
118

 

 
118

Total other expense
(28,418
)
 

 
(28,418
)
 
16,006

 
(12,412
)
 
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
17,541

 
498

 
18,039

 
17,209

 
35,248

Income tax expense
7,507

 
197

 
7,704

 
6,254

vi
13,958

Net income (loss)
$
10,034

 
$
301

 
$
10,335

 
$
10,955

 
$
21,290

i. The amounts in this column represents the Predecessor’s historical GAAP results after removing the results of operations of the Frozen operations.
ii. The adjustment represents the incremental stock based compensation expense under the new Simply Good Foods omnibus incentive plan.
iii. The adjustment reflects the difference in the intangible asset amortization expense associated with the allocation of purchase price to intangible assets due to the Business Combination. The amortization expense decreased as more indefinite lived intangible assets were identified for the successor entity than the predecessor entity. The amount of amortizable intangible assets identified in the Business Combination decreased from $125.8 million to $88.0 million.
iv. The Simply Good Foods warrants are not warrant liabilities and are accounted for as equity warrants. The adjustment represents the corresponding decrement to expense.
v. The adjustment represents the expected interest expense associated with the new term loan and revolving debt facilities of Simply Good Foods. The predecessor entity had $337.2 million outstanding as of August 27, 2016 while the successor entity had $200.0 million outstanding. The long term debt of the predecessor entity accrued interest at 6.25% on the first lien and 9.75% on the second lien while the successor debt accrues interest at 3 month LIBOR and 4%. The significant reduction in outstanding principal, and lower interest rates, drive significant expense savings.
vi. Represents the effective income tax rate of 39.6%
vii. Approximately $2.1 million of Pro Forma Frozen Licensing Selling costs were previously classified as Pro Forma Frozen Licensing Distribution expenses.

12



Comparison of Results for the Unaudited Supplemental Pro Forma combined 52-Week Period Ended August 26, 2017 and the Unaudited Supplemental Pro Forma 52-Week Period Ended August 27, 2016
For comparative purposes, we are presenting a supplemental unaudited pro forma combined statement of operations for the fifty two week period ended August 26, 2017, and we discuss such pro forma results compared to the supplemental unaudited pro forma statement of operation for the fifty two week period ended August 27, 2016. The following table presents, for the periods indicated, selected information from our consolidated financial results, including information presented as a percentage of net sales:
 
 
 Pro Forma Combined
(Unaudited)
 
 
 Pro Forma
 (Unaudited)
 
 
52-week ended
 
 
 
 
52-weeks ended
 
 
(Dollars in thousands, except share data)
 
August 26, 2017
 
% of sales
 
 
August 27, 2016
 
% of sales
Net sales
 
$
396,171

 
100.0
 %
 
 
$
369,039

 
100.0
 %
Cost of goods sold
 
209,950

 
53.0
 %
 
 
199,487

 
54.1
 %
Gross profit
 
186,221

 
47.0
 %
 
 
169,552

 
45.9
 %
 
 
 
 
 
 
 
 
 
 
Operating Expenses:
 
 
 
 
 
 
 
 
 
Distribution
 
17,754

 
4.5
 %
 
 
15,466

 
4.2
 %
Selling
 
16,227

 
4.1
 %
 
 
16,073

 
4.4
 %
Marketing
 
38,204

 
9.6
 %
 
 
36,264

 
9.8
 %
General and administrative
 
47,724

 
12.0
 %
 
 
45,448

 
12.3
 %
Depreciation and amortization
 
7,638

 
1.9
 %
 
 
7,592

 
2.1
 %
Business combination transaction costs
 

 
 %
 
 

 
 %
Other Expense
 
141

 
 %
 
 
1,049

 
0.3
 %
Total operating expenses
 
127,688

 
32.2
 %
 
 
121,892

 
33.0
 %
 
 
 
 
 
 
 
 
 
 
Income from operations
 
58,533

 
14.8
 %
 
 
47,660

 
12.9
 %
 
 
 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
 
 
Changes in warrant liabilities
 

 
 %
 
 

 
 %
Interest expense
 
(11,911
)
 
(3.0
)%
 
 
(11,911
)
 
(3.2
)%
Loss on foreign currency transactions
 
646

 
0.2
 %
 
 
(619
)
 
(0.2
)%
Other income
 
251

 
0.1
 %
 
 
118

 
 %
Total other expense
 
(11,014
)
 
(2.8
)%
 
 
(12,412
)
 
(3.4
)%
 
 
 
 
 
 
 
 
 
 
Income before income taxes
 
47,519

 
12.0
 %
 
 
35,248

 
9.6
 %
Income tax expense
 
18,818

 
4.7
 %
 
 
13,958

 
3.8
 %
Net income
 
$
28,701

 
7.2
 %
 
 
$
21,290

 
5.8
 %
 
 
 
 
 
 
 
 
 
 
Earnings per share from net income:
 
 
 
 
 
 
 
 
 
Basic
 
$
0.41

 
 
 
 
$
0.30

 
 
Diluted
 
$
0.40

 
 
 
 
$
0.30

 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
 
 
Basic
 
70,562,477

 
 
 
 
70,562,477

 
 
Diluted
 
71,254,770

 
 
 
 
71,254,770

 
 



13



Reconciliation of Adjusted EBITDA
Adjusted EBITDA. Adjusted EBITDA is a non-GAAP financial measure commonly used in our industry and should not be construed as an alternative to net income as an indicator of operating performance or as an alternative to cash flow provided by operating activities as a measure of liquidity (each as determined in accordance with GAAP). Simply Good Foods defines Adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) as net income (loss) before interest expense, income tax expense, depreciation and amortization with further adjustments to exclude the following items: stock-based compensation and warrant expense, transaction costs and IPO readiness, restructuring costs, management fees, transactional exchange impact and other one-time expenses. The Company believes that the inclusion of these supplementary adjustments in presenting Adjusted EBITDA are appropriate to provide additional information to investors and reflects more accurately operating results of the on-going operations. Adjusted EBITDA may not be comparable to other similarly titled captions of other companies due to differences in calculation.
The table below provides a reconciliation of Adjusted EBITDA to its most directly comparable GAAP measure, which is net income (loss), for the successor period from July 7, 2017 through August 26, 2017, the predecessor period from August 28, 2016 through July 6, 2017, the pro forma combined fifty two week period ending August 26, 2017, and the predecessor fifty two week period ending August 27, 2016.
Adjusted EBITDA Reconciliation:
(In thousands)
 
2017
 
2016
 
From July 7, 2017 through August 26, 2017
 
 
From August 28, 2016 through July 6, 2017
 
52-weeks ended
 
52-weeks ended
 
 
 
 
August 26, 2017
 
August 27, 2016
 
(Successor)
 
 
(Predecessor)
 
(Pro Forma
Combined)
 
(Predecessor,
Pro Forma)
 
(Unaudited)
 
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
Net income
 
$
450

 
 
$
(2,485
)
 
$
28,701

 
$
21,290

Interest
 
1,662

 
 
22,724

 
11,911

 
11,911

Taxes
 
290

 
 
4,570

 
18,818

 
13,958

Depreciation/Amortization
 
1,000

 
 
8,617

 
7,638

 
7,592

EBITDA
 
3,402

 
 
33,426

 
67,068

 
54,751

Stock Option and Warrant Expense
 
412

 
 
1,719

 
3,488

 
3,488

Transaction Fees / IPO Readiness
 

 
 
371

 
371

 
470

Restructuring
 

 
 
167

 
167

 
1,049

Roark Management Fee
 

 
 
1,200

 
1,200

 
1,670

Recall Receivable Reserve
 
(1,195
)
 
 

 
(1,195
)
 
1,922

Frozen Licensing Media
 
456

 
 
794

 
1,250

 

Non-recurring legal costs
 
96

 
 
723

 
819

 

Business combination transaction costs
 

 
 
25,608

 

 

Purchase accounting inventory step-up
 
5,989

 
 

 

 

Other
 
(506
)
 
 
(119
)
 
(625
)
 
896

Adjusted EBITDA
 
$
8,654

 
 
$
63,889

 
$
72,543

 
$
64,246



14



Supplemental Pro Forma Combined 13-Week Period Ended August 26, 2017
For comparative purposes, we are presenting a supplemental unaudited pro forma combined statement of operations for the 13-week period ended August 26, 2017.
The unaudited pro forma combined statements of operations for the quarter ended August 26, 2017 presents our consolidated results of operations giving pro forma effect to the Business Combination as if it had occurred as of May 28, 2017. The pro forma combined adjustments are based on available information and upon assumptions that our management believes are reasonable in order to reflect, on a pro forma combined basis, the impact of these transactions on the historical financial information of our Predecessor and Successor entities, as applicable.
The Business Combination is accounted for using the acquisition method of accounting in accordance with the FASB Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”). ASC 805 requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values, as determined in accordance with ASC 820, Fair Value Measurements, as of the Business Combination date. Under the acquisition method of accounting, the assets acquired and liabilities assumed will be recorded at the effective time of the Business Combination at their respective fair values. ASC 805 establishes a measurement period to provide the Company with a reasonable amount of time to obtain the information necessary to identify and measure various items in a business combination and cannot extend beyond one year from the acquisition date.
The initial estimated fair values of the acquired assets and assumed liabilities as of the Closing Date, which are based on the consideration paid and our estimates and assumptions, are reflected herein. As explained in more detail in Note 3. Business Combinations of the Consolidated Financial Statements, the total purchase price to acquire Atkins has been allocated to the assets acquired and assumed liabilities, based upon preliminary estimated fair values at the Closing Date. We utilized third-party valuation specialists to assist our management in determining the fair values of the acquired assets and liabilities assumed.
The unaudited pro forma combined financial information contains a variety of adjustments, assumptions and estimates, is subject to numerous other uncertainties and the assumptions and adjustments as described in the accompanying notes hereto and should not be relied upon as being indicative of our results of operations had the Business Combination occurred on May 28, 2017. The unaudited pro forma combined financial information also does not project our results of operations for any future period or date. The unaudited pro forma combined financial information for the thirteen week period ended August 26, 2017 includes results of the Successor and Predecessor entities. The pro forma combined adjustments give effect to the items identified in the pro forma combined table below in connection with the Business Combination.


15



Pro Forma Statement of Operations
For the pro forma 13-week period ended August 26, 2017
(Unaudited)
(In thousands)
 
 
Historical (i)
 
 
 
 Pro Forma Combined
(Unaudited)
 
 
(Successor)
 
 
(Predecessor)
 
 
 
 
 
From July 7, 2017
through August 26, 2017
 
 
From May 28, 2017
through July 6, 2017
 
Pro Forma Adjustments
 
13-week ended
(In thousands)
 
 
 
 
 
August 26, 2017
Net sales
 
$
56,334

 
 
$
41,223

 
$

 
$
97,557

Cost of goods sold
 
35,941

 
 
20,239

 
(5,989
)
ii
50,191

Gross profit
 
20,393

 
 
20,984

 
5,989

 
47,366

 
 
 
 
 
 
 
 
 
 
Operating Expenses:
 
 
 
 
 
 
 
 
 
Distribution
 
2,784

 
 
1,557

 

 
4,341

Selling
 
2,322

 
 
1,284

 

 
3,606

Marketing
 
4,615

 
 
4,620

 

 
9,235

General and administrative
 
7,813

 
 
5,301

 
(110
)
iii
13,004

Depreciation and amortization
 
1,000

 
 
1,208

 
(298
)
iv
1,910

Business combination transaction costs
 

 
 
25,608

 
(25,608
)
v

Other expense
 

 
 
66

 

 
66

Total operating expenses
 
18,534

 
 
39,644

 
(26,016
)
 
32,162

 
 
 
 
 
 
 
 
 
 
Income from operations
 
1,859

 
 
(18,660
)
 
32,005

 
15,204

 
 
 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
 
 
Change in warrant liabilities
 

 
 

 

vi

Interest expense
 
(1,662
)
 
 
(2,665
)
 
1,349

vii
(2,978
)
Loss (gain) on foreign currency transactions
 
513

 
 
127

 

 
640

Other income
 
30

 
 
(61
)
 

 
(31
)
Total other expense
 
(1,119
)
 
 
(2,599
)
 
1,349

 
(2,369
)
 
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
 
740

 
 
(21,259
)
 
33,354

 
12,835

Income tax expense
 
290

 
 
(4,177
)
 
8,970

viii
5,083

Net income (loss)
 
$
450

 
 
$
(17,082
)
 
$
24,384

 
$
7,752


16



i. The amounts presented represent the Successor’s and Predecessor’s historical GAAP results of operations.
ii. The adjustment represents a non-cash, one time inventory fair value adjustment recorded in conjunction with the Business Combination and was recognized in the successor period, and is not indicative of future cost of good sold.
iii. The adjustment represents the incremental stock based compensation expense incurred under the Simply Good Foods Omnibus Incentive Plan.
iv. The adjustment reflects the difference in the intangible asset amortization expense associated with the allocation of purchase price to intangible assets due to the Business Combination. The amortization expense decreased as more indefinite lived intangible assets were identified for the successor entity than the predecessor entity. The amount of amortizable intangible assets identified in the Business Combination decreased from $125.8 million to $88.0 million.
v. Business combination transaction expenses primarily consist of fees related to the Business Combination and the Company’s acquisition activities.
vi. Predecessor warrants were accounted for as warrant liabilities, which were exercised and settled with the Business Combination.
vii. Represents the adjustment necessary to arrive at the expected interest expense associated with the new term loan and revolving debt facilities of Simply Good Foods. The predecessor entity had $337.2 million outstanding as of August 27, 2016 while the successor entity had $200.0 million outstanding. The long term debt of the predecessor entity accrued interest at 6.25% on the first lien and 9.75% on the second lien while the successor debt accrues interest at 3 month LIBOR plus 4%. The significant reduction in outstanding principal, and lower interest rates, drive significant expense savings.
viii. Represents the adjustment necessary to arrive at an effective income tax rate of 39.6%.

17



Supplemental Pro Forma 13-Week Period Ended August 27, 2016
The following unaudited pro forma financial information has been prepared from the perspective of Atkins and the thirteen week period ending August 27, 2016. The unaudited pro forma income statement for the thirteen weeks ended August 27, 2016 presents the historical consolidated statement of operations of Atkins for the thirteen weeks ended August 27, 2016, giving effect to the Business Combination as if it had occurred on May 29, 2016.
The unaudited pro forma financial statements give effect to the Business Combination in accordance with the acquisition method of accounting for business combinations. The historical financial information has been adjusted to give pro forma effect to events that are related and/or directly attributable to the Business Combination, are factually supportable and are expected to have a continuing impact on the results of the combined company. The adjustments presented on the unaudited pro forma combined financial statements have been identified and presented to provide relevant information necessary for an accurate understanding of the combined company upon consummation of the Business Combination.
The unaudited pro forma financial statements also reflect the impact of the Atkins license arrangement for frozen meals sold in the U.S. by Bellisio. This agreement was effective September 1, 2016 and is a seven-year license with Bellisio to license its frozen meals business. Bellisio manufactures, distributes, markets, promotes and sells Atkins frozen food products under the Atkins licensed mark. The effects of the license agreement are presented in the “Frozen License Adjustments” and “Atkins' Pro Forma” columns in the unaudited historical consolidated statement of operations for the 13 weeks ended August 27, 2016.
The unaudited pro forma financial information is for illustrative purposes only. The financial results may have been different had the Business Combination actually been completed sooner. You should not rely on the unaudited pro forma combined financial information as being indicative of the historical results that would have been achieved if the Business Combination been completed as of May 29, 2016.

18



Pro Forma Statement of Operations
For the pro forma 13-week period ended August 27, 2016
(Unaudited)
(In thousands)
(in thousands)
Historical Atkins
 
Frozen License Adjustments
 
Atkins' Pro Forma (i)
 
Pro Forma Adjustments
 
Pro Forma (Unaudited)
Net sales
$
103,491

 
$
(15,030
)
 
$
88,461

 
$

 
$
88,461

Cost of goods sold
59,813

 
$
(12,439
)
 
47,374

 

 
47,374

Gross profit
43,678

 
(2,591
)
 
41,087

 

 
41,087

 
 
 
 
 
 
 
 
 
 
Operating Expenses:
 
 
 
 
 
 
 
 
 
Distribution
4,816

 
(806
)
vii
4,010

 
 
 
4,010

Selling
3,700

 
(540
)
vii
3,160

 
 
 
3,160

Marketing
8,793

 
(625
)
 
8,168

 
 
 
8,168

General and administrative
12,881

 
(892
)
 
11,989

 
313

ii
12,302

Depreciation and amortization
2,474

 

 
2,474

 
(576
)
iii
1,898

Other expense
890

 

 
890

 
 
 
890

Total operating expenses
33,554

 
(2,863
)
 
30,691

 
(263
)
 
30,428

 
 
 
 
 
 
 
 
 
 
Income from operations
10,124

 
272

 
10,396

 
263

 
10,659

 

 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
 
 
Change in warrant liabilities
(722
)
 
 
 
(722
)
 
722

iv

Interest expense
(6,903
)
 
 
 
(6,903
)
 
3,925

v
(2,978
)
Loss (gain) on foreign currency transactions
(575
)
 
 
 
(575
)
 

 
(575
)
Other income
14

 
 
 
14

 

 
14

Total other expense
(8,186
)
 

 
(8,186
)
 
4,647

 
(3,539
)
 
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
1,938

 
272

 
2,210

 
4,910

 
7,120

Income tax expense
779

 
91

 
870

 
1,950

vi
2,820

Net income (loss)
$
1,159

 
$
181

 
$
1,340

 
$
2,960

 
$
4,300

i. The amounts in this column represents the Predecessor’s historical GAAP results after removing the results of operations of the Frozen operations.
ii. The adjustment represents the incremental stock based compensation expense under the new Simply Good Foods omnibus incentive plan.
iii. The adjustment reflects the difference in the intangible asset amortization expense associated with the allocation of purchase price to intangible assets due to the Business Combination. The amortization expense decreased as more indefinite lived intangible assets were identified for the successor entity than the predecessor entity. The amount of amortizable intangible assets identified in the Business Combination decreased from $125.8 million to $88.0 million.
iv. The Simply Good Foods warrants are not warrant liabilities and are accounted for as equity warrants. The adjustment represents the corresponding decrement to expense.
v. The adjustment represents the expected interest expense associated with the new term loan and revolving debt facilities of Simply Good Foods. The predecessor entity had $337.2 million outstanding as of August 27, 2016 while the successor entity had $200.0 million outstanding. The long term debt of the predecessor entity accrued interest at 6.25% on the first lien and 9.75% on the second lien while the successor debt accrues interest at 3 month LIBOR and 4%. The significant reduction in outstanding principal, and lower interest rates, drive significant expense savings.
vi. Represents the effective income tax rate of 39.6%
vii. Considers approximately $0.5 million of Pro Forma Frozen Licensing Selling costs were previously classified as Pro Forma Frozen Licensing Distribution expenses for the fourth quarter.

19



Comparison of Results for the Supplemental Pro Forma Combined 13-Week Period Ended August 26, 2017 and the Supplemental Pro Forma 13-Week Period Ended August 27, 2016
For comparative purposes, we are presenting a supplemental unaudited pro forma combined statement of operations for the thirteen week period ended August 26, 2017, and we discuss such pro forma combined results compared to the supplemental unaudited pro forma statement of operation for the thirteen week period ended August 27, 2016. The following table presents, for the periods indicated, selected information from our consolidated financial results, including information presented as a percentage of net sales:
 
 
 Pro Forma Combined
(Unaudited)
 
 
 Pro Forma
(Unaudited)
 
 
13-week ended
 
 
 
 
13-weeks ended
 
 
(Dollars in thousands, except share data)
 
August 26, 2017
 
% of sales
 
 
August 27, 2016
 
% of sales
Net sales
 
$
97,557

 
100.0
 %
 
 
$
88,461

 
100.0
 %
Cost of goods sold
 
50,191

 
51.4
 %
 
 
47,374

 
53.6
 %
Gross profit
 
47,366

 
48.6
 %
 
 
41,087

 
46.4
 %
 
 
 
 
 
 
 
 
 
 
Operating Expenses:
 
 
 
 
 
 
 
 
 
Distribution
 
4,341

 
4.4
 %
 
 
4,010

 
4.5
 %
Selling
 
3,606

 
3.7
 %
 
 
3,160

 
3.6
 %
Marketing
 
9,235

 
9.5
 %
 
 
8,168

 
9.2
 %
General and administrative
 
13,004

 
13.3
 %
 
 
12,302

 
13.9
 %
Depreciation and amortization
 
1,910

 
2.0
 %
 
 
1,898

 
2.1
 %
Business combination transaction costs
 

 
 %
 
 

 
 %
Other Expense
 
66

 
0.1
 %
 
 
890

 
1.0
 %
Total operating expenses
 
32,162

 
33.0
 %
 
 
30,428

 
34.4
 %
 
 
 
 
 
 
 
 
 
 
Income from operations
 
15,204

 
15.6
 %
 
 
10,659

 
12.0
 %
 
 
 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
 
 
Changes in warrant liabilities
 

 
 %
 
 

 
 %
Interest expense
 
(2,978
)
 
(3.1
)%
 
 
(2,978
)
 
(3.4
)%
Loss on foreign currency transactions
 
640

 
0.7
 %
 
 
(575
)
 
(0.7
)%
Other income
 
(31
)
 
 %
 
 
14

 
 %
Total other expense
 
(2,369
)
 
(2.4
)%
 
 
(3,539
)
 
(4.0
)%
 
 
 
 
 
 
 
 
 
 
Income before income taxes
 
12,835

 
13.2
 %
 
 
7,120

 
8.0
 %
Income tax expense
 
5,083

 
5.2
 %
 
 
2,820

 
3.2
 %
Net income
 
$
7,752

 
7.9
 %
 
 
$
4,300

 
4.9
 %
 
 
 
 
 
 
 
 
 
 
Earnings per share from net income:
 
 
 
 
 
 
 
 
 
Basic
 
$
0.11

 
 
 
 
$
0.06

 
 
Diluted
 
$
0.11

 
 
 
 
$
0.06

 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
 
 
Basic
 
70,562,477

 
 
 
 
70,562,477

 
 
Diluted

71,254,770

 
 
 
 
71,254,770

 
 

20



Reconciliation of Adjusted EBITDA
Adjusted EBITDA. Adjusted EBITDA is a non-GAAP financial measure commonly used in our industry and should not be construed as an alternative to net income as an indicator of operating performance or as an alternative to cash flow provided by operating activities as a measure of liquidity (each as determined in accordance with GAAP). Simply Good Foods defines Adjusted EBITDA (Earnings before interest, tax, depreciation, and amortization) as net income (loss) before interest expense, income tax expense, depreciation and amortization with further adjustments to exclude the following items: stock-based compensation and warrant expense, transaction costs and IPO readiness, restructuring costs, management fees, transactional exchange impact and other one-time expenses. The Company believes that the inclusion of these supplementary adjustments in presenting Adjusted EBITDA are appropriate to provide additional information to investors and reflects more accurately operating results of the on-going operations. Adjusted EBITDA may not be comparable to other similarly titled captions of other companies due to differences in calculation.
The table below provides a reconciliation of pro forma Adjusted EBITDA to its most directly comparable GAAP measure, which is net income (loss), for the pro forma thirteen week periods ending August 26, 2017, and August 27, 2016.
Adjusted EBITDA Reconciliation:
(In thousands)
 
13-weeks ended
 
13-weeks ended
 
Pro forma combined
 
Pro forma
 
August 26, 2017
 
August 27, 2016
 
 
(unaudited)
 
(unaudited)
Net income
 
$
7,752

 
$
4,300

Interest
 
2,978

 
2,978

Taxes
 
5,083

 
2,820

Depreciation/Amortization
 
1,910

 
1,898

EBITDA
 
17,723

 
11,996

Stock Option and Warrant Expense
 
872

 
872

Restructuring
 
93

 
890

Roark Management Fee
 
(170
)
 
313

Recall Receivable Reserve
 
(1,195
)
 
1,922

Frozen Licensing Media
 
456

 

Non-recurring legal costs
 
201

 

Other
 
(570
)
 
818

Adjusted EBITDA
 
$
17,410

 
$
16,811


21

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