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The Simply Good Foods Company Reports Fiscal Second Quarter 2020 Financial Results;
Net Sales and Earnings Exceeded Expectations

Denver, CO, April 6, 2020 - The Simply Good Foods Company (Nasdaq: SMPL) (“Simply Good Foods,” or the “Company”), a developer, marketer and seller of branded nutritional foods and snacking products, today reported financial results for the thirteen week period ended February 29, 2020. The Company completed the acquisition of Quest Nutrition, LLC (“Quest”) on November 7, 2019. The Company’s second quarter results include thirteen weeks of Quest results and about 16 weeks for the year-to-date period. Additionally, note that the Company’s reference to “legacy Atkins” in this press release encompasses Simply Goods Foods’ business excluding Quest.

“Simply Good Foods second quarter results exceeded our expectations with strong performance from both the legacy Atkins and Quest brands,” said Joseph E. Scalzo, President and Chief Executive Officer of Simply Good Foods. “Legacy Atkins net sales increased 12.1% driven by point of sales growth in measured and non-measured channels and a slight seasonal inventory build. Combined with good cost controls, legacy Atkins margins and profit were up nicely. As expected, Quest net sales growth was strong, up double digits on a percentage basis versus the comparable year ago period resulting in margin improvement.”

“Total Simply Good Foods retail takeaway for the thirteen weeks ended February 29, 2020 was 11.8%, in U.S. measured channels, outpacing nutritional snacking category growth. Atkins® brand retail takeaway in the second quarter increased 6.1% despite a very difficult comparison in the same period a year ago. Additionally, Atkins® non-measured e-commerce business momentum continued and contributed to our second quarter net sales growth. Quest® brand retail takeaway in measured channels continued to be strong and increased 27.1% in the quarter and the Quest® brand e-commerce business also continued to be very strong.”

“Overall, the first half of fiscal 2020 performance exceeded our expectations with no material effects from COVID-19. The Quest integration is progressing well and we are on track with our timeline to achieve the identified $20 million in synergies. As such, we began the second half of the year confident in our ability to achieve our previously communicated fiscal year 2020 outlook. Since March, however, retail foot traffic has been volatile with positive spikes in the beginning of the month followed by a significant slowdown in the second half of the month. Given the uncertainty around consumer purchasing behavior due to COVID-19 movement restrictions, among other unknown potential COVID-19 related effects, we believe it is prudent to withdraw our fiscal 2020 full year guidance at this time.”

Second Quarter 2020 Financial Highlights vs. Second Quarter 2019

Net sales increased 83.4%, or $103.3 million, to $227.1 million
Gross profit margin of 37.6%, a decrease of 250 basis points
Includes a non-cash $5.1 million inventory purchase accounting step-up adjustment related to the Quest acquisition
Net income of $10.7 million versus $12.7 million
Adjusted EBITDA(1) increased 81.7% to $41.7 million, primarily related to the Quest acquisition
Earnings per diluted share (“EPS”), $0.11, a decrease of $0.04 per fully diluted share
Adjusted Diluted EPS (1) of $0.23 versus $0.18

Net sales increased $103.3 million, or 83.4%, to $227.1 million. The Quest acquisition contributed 71.3% to net sales growth. Legacy Atkins net sales increased 12.1%, driven by volume growth, which was partially offset, as expected, by slightly higher trade promotions.






________________________________________
(1) Adjusted EBITDA is a non-GAAP financial measure. Please refer to “Reconciliation of Adjusted EBITDA” in this press release for an explanation and reconciliation of this non-GAAP financial measure.
(2) Adjusted Diluted Earnings Per Share is a non-GAAP financial measure. The Company excludes acquisition related costs, such as business transaction costs, integration expense and depreciation and amortization expense in calculating Adjusted Diluted Earnings Per Share. Please refer to “Reconciliation of Adjusted Diluted Earnings Per Share” in this press release for an explanation and reconciliation of this non-GAAP financial measure.

1



Gross profit was $85.4 million for the second quarter of 2020, an increase of $35.7 million or 72.0%. The increase in gross profit was driven by the Quest acquisition and legacy Atkins sales growth, partially offset by a non-cash $5.1 million inventory purchase accounting step-up adjustment related to the Quest acquisition. As a result, gross profit margin was 37.6%, a 250 basis point decline versus last year. The non-cash inventory purchase accounting step-up, which is now complete as a full quarter of Quest results are included in the Company’s consolidated financial statements, adversely affected gross margin by 220 basis points. Quest’s slightly lower gross margin and the previously mentioned timing of increased trade promotions were a 30 basis point headwind.

In the second quarter of 2020 the Company reported net income of $10.7 million, a decline of $2.1 million versus the comparable period of 2019, primarily due to costs related to the Quest acquisition. The increase in gross profit was partially offset by:
a 83.6% increase in selling and marketing expenses due to the inclusion of Quest, and the timing of greater legacy Atkins advertising expenses discussed last quarter;
business transaction costs of $0.7 million;
a $14.4 million increase in general and administrative expenses as a result of the inclusion of Quest and integration expenses of $3.9 million. Legacy Atkins general and administrative expenses were about the same as the year ago period; and
higher interest expense of about $7.2 million due to an increase in the principal amount of the Company’s term loan related to the financing for the Quest acquisition.

Adjusted EBITDA1, a non-GAAP financial measure used by the Company that makes certain adjustments to net income calculated under GAAP, increased 81.7% to $41.7 million.

Adjusted Diluted Earnings Per Share2, a non-GAAP financial measure used by the Company that makes certain adjustments to diluted earnings per share calculated under GAAP, was $0.23 versus $0.18 is the year ago period.

Year-to-Date Second Quarter 2020 Financial Highlights vs. Year-to-Date Second Quarter 2019

Net sales increased 55.0%, or $134.5 million, to $379.3 million
Gross profit margin of 38.9%, a decrease of 260 basis points
Includes a non-cash $7.5 million inventory purchase accounting step-up adjustment related to the Quest acquisition
Income tax expense was $2.2 million versus $8.7 million
Net income decreased $22.1 million to $5.9 million
Adjusted EBITDA(1) increased 48.0% to $73.5 million, primarily related to the Quest acquisition
Earnings per diluted share (“EPS”), $0.06, a decrease of $0.27 per fully diluted share
Adjusted Diluted EPS (1) of $0.45, an increase of $0.06 per fully diluted share

Net sales increased $134.5 million, or 55.0%, to $379.3 million. Quest was a 43.1% benefit to net sales growth. Legacy Atkins net sales increased 11.9%, driven by volume growth, which was partially offset, as expected, by slightly higher trade promotions.

Gross profit was $147.6 million for the year-to-date second quarter of 2020, an increase of $46.0 million or 45.3%. The increase in gross profit was driven by the Quest Acquisition and legacy Atkins sales growth, partially offset by a non-cash $7.5 million inventory purchase accounting step-up adjustment related to the Quest acquisition. As a result, gross profit margin was 38.9%, a 260 basis point decline versus last year. The non-cash inventory purchase accounting step-up adversely affected gross margin by 200 basis points. Quest’s slightly lower gross margin and the previously mentioned timing of increased trade promotions were a 60 basis point headwind.

Net income was $5.9 million for the year-to-date second quarter of 2020, a decrease of $22.1 million compared to net income of $28.0 million for the comparable period of 2019. The decline was primarily due to costs related to the Quest acquisition. The increase in gross profit was primarily offset by:
a 51.3% increase in selling and marketing expenses primarily due to the inclusion of Quest, and the timing of greater legacy Atkins advertising expense discussed previously;
a $20.5 million increase in general and administrative expenses to $46.2 million as a result of:
the inclusion of Quest;
legacy Atkins general and administrative expenses increased, as discussed previously, due to higher people related costs; and
integration expenses of $5.3 million;

2



business transaction costs of $26.9 million; and
higher interest expense of about $9.0 million due to an increase in the principal amount of the Company’s term loan related to the financing for the Quest acquisition.

Adjusted EBITDA1, a non-GAAP financial measure used by the Company that makes certain adjustments to net income calculated under GAAP, increased 48.0% to $73.5 million.

Adjusted Diluted Earnings Per Share2, a non-GAAP financial measure used by the Company that makes certain adjustments to diluted earnings per share calculated under GAAP, was $0.45 versus $0.39 in the year ago period.

Balance Sheet and Cash Flow

At the end of the fiscal second quarter weighted average total diluted shares outstanding were approximately 100.3 million versus approximately 85.4 million in the year ago period. The increase in the shares outstanding was due to the previously discussed common stock public offering on October 7, 2019.

As of February 29, 2020, the Company had cash and cash equivalents of $46.1 million. In the fiscal second quarter the Company made principal term loan payments of $20 million, therefore, outstanding principal under its term loan was $635.5 million at the end of the second quarter.

Given the unpredictable nature of the COVID-19 crisis, in March the Company began to increase finished goods inventory of some of its high velocity products. In conjunction with this, as well as for other working capital and general corporate purposes, the Company drew down $25 million on its $75 million availability under its revolving credit facility. The Company believes it is more than adequately positioned to meet its obligations and at the end of March 2020 the Company's estimated cash and cash equivalents balance was about $80 million.

Given the Company’s cash balance and outstanding term loan balance at the end of the second quarter we are well on track to achieving our target of a trailing twelve month Net Debt to Adjusted EBITDA ratio of less than 3.75x by fiscal year-end August 2020.

Outlook

“We entered the second half of the fiscal year with positive net sales momentum, solid cost containment and confidence in our ability to execute our plans to deliver on our financial objectives. Furthermore, the Quest integration is on-track and our synergy plans are proceeding as expected. However, volatile retail foot traffic in March has impacted our retail takeaway. Specifically, in the first half of the month, retail takeaway of our products was very strong; however, this has been followed by a notable slowdown underscoring the unpredictable nature of current consumer purchasing behavior we believe is a result of the current COVID-19 movement restrictions,” Scalzo continued. “The severity and duration of the COVID-19 pandemic is uncertain and will likely continue during the second half of our fiscal year. Therefore, given the rapidly evolving situation and the uncertainty related to potential effects of the COVID-19 outbreak, we believe it is prudent to withdraw our previously communicated fiscal 2020 outlook.”

“We continue to believe that health and wellness is important to consumers and the nutritional profiles of our products satisfy many of their snacking and meal replacement needs. There are many long-term growth opportunities that exist within our business and the high-growth underpenetrated nutritional snacking category. Our employees have adjusted remarkably well to a remote work environment, and we are fortunate to have an experienced management team and Board of Directors to navigate the short-term challenges of this situation while positioning the business for continued long-term growth. We will continue to monitor the situation and will provide additional perspective on the year during our fiscal third quarter conference call in early July,” Scalzo concluded.





3



Conference Call and Webcast Information

The Company will host a conference call with members of the executive management team to discuss these results today, Monday, April 6, 2020 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 accompanying presentation slides will be broadcast live over the Internet hosted at the “Investor Relations” section of the Company's website at http://www.thesimplygoodfoodscompany.com. A telephone replay will be available approximately two hours after the call concludes and will be available through Monday, April 20, 2020, by dialing 844-512-2921 from the U.S., or 412-317-6671 from international locations, and entering confirmation code 13700766.

About The Simply Good Foods Company

The Simply Good Foods Company (Nasdaq: SMPL), headquartered in Denver, Colorado, is a highly-focused food company with a product portfolio consisting primarily of nutrition bars, ready-to-drink shakes, sweet and salty snacks and confectionery products marketed under the Atkins®, Quest®, SimplyProtein® and Atkins Endulge® brand names. Simply Good Foods is poised to expand its wellness platform through innovation and organic growth along with investment opportunities in the snacking space and broader food category. Simply Good Foods 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. For more information, please http://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”, “expect”, “intends” or other similar words, phrases or expressions. These forward-looking statements include the expected effects from the COVID-19 outbreak, statements regarding the integration of Quest, future plans for the Company, the estimated or anticipated future results and benefits of the Company’s future plans and operations, future capital structure, future opportunities for the Company, and other statements that are not historical facts. These statements are based on the current expectations of the Company’s management and are not predictions of actual performance. These statements are subject to a number of risks and uncertainties and the Company’s business and actual results may differ materially. These risks and uncertainties include, but are not limited to the effect of the COVID-19 outbreak on the Company's business, suppliers (including its contract manufacturing and logistics suppliers), customers, consumers and employees along with disruptions or inefficiencies in the supply chain resulting from any effects of the COVID-19 outbreak; achieving the anticipated benefits of the Quest acquisition; difficulties and delays in achieving the synergies and cost savings in connection with the Quest acquisition; changes in the business environment in which the Company operates including general financial, economic, capital market, regulatory and political conditions affecting the Company and the industry in which the Company operates; changes in consumer preferences and purchasing habits; the Company’s ability to maintain adequate product inventory levels to timely supply customer orders; changes in taxes, tariffs, duties, governmental laws and regulations; the availability of or competition for other brands, assets or other opportunities for investment by the Company or to expand the Company’s business; competitive product and pricing activity; difficulties of managing growth profitably; the loss of one or more members of the Company’s or Quest’s management team; and other risk factors described from time to time in the Company’s Form 10-K, Form 10-Q, and Form 8-K reports (including all amendments to those reports) filed with the 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.

Investor Contact

Mark Pogharian
Vice President, Investor Relations, Treasury and Business Development
The Simply Good Foods Company
717-307-8197
mpogharian@simplygoodfoodsco.com


4



The Simply Good Foods Company and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited, dollars in thousands, except share data)
 
 
February 29, 2020
 
August 31, 2019
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
46,115

 
$
266,341

Accounts receivable, net
 
89,966

 
44,240

Inventories
 
79,552

 
38,085

Prepaid expenses
 
5,183

 
2,882

Other current assets
 
14,818

 
6,059

Total current assets
 
235,634

 
357,607

 
 
 
 
 
Long-term assets:
 
 
 
 
Property and equipment, net
 
12,008

 
2,456

Intangible assets, net
 
1,149,410

 
306,139

Goodwill
 
570,716

 
471,427

Other long-term assets
 
33,580

 
4,021

Total assets
 
$
2,001,348

 
$
1,141,650

 
 
 
 
 
Liabilities and stockholders’ equity
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
38,018

 
$
15,730

Accrued interest
 
1,868

 
1,693

Accrued expenses and other current liabilities
 
34,139

 
29,933

Current maturities of long-term debt
 
264

 
676

Total current liabilities
 
74,289

 
48,032

 
 
 
 
 
Long-term liabilities:
 
 
 
 
Long-term debt, less current maturities
 
624,076

 
190,259

Deferred income taxes
 
77,683

 
65,383

Other long-term liabilities
 
28,267

 
532

Total liabilities
 
804,315

 
304,206

See commitments and contingencies (Note 10)
 
 
 
 
 
 
 
 
 
Stockholders’ equity:
 
 
 
 
Preferred stock, $0.01 par value, 100,000,000 shares authorized, none issued
 

 

Common stock, $0.01 par value, 600,000,000 shares authorized, 95,476,537 and 81,973,284 issued at February 29, 2020 and August 31, 2019, respectively
 
955

 
820

Treasury stock, 98,234 and 98,234 shares at cost at February 29, 2020 and August 31, 2019, respectively
 
(2,145
)
 
(2,145
)
Additional paid-in-capital
 
1,087,506

 
733,775

Retained earnings
 
111,694

 
105,830

Accumulated other comprehensive loss
 
(977
)
 
(836)

Total stockholders’ equity
 
1,197,033

 
837,444

Total liabilities and stockholders’ equity
 
$
2,001,348

 
$
1,141,650



5



The Simply Good Foods Company and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited, dollars in thousands, except share data)
 
 
Thirteen Weeks Ended
 
Twenty-Six Weeks Ended
 
 
February 29, 2020
 
February 23, 2019
 
February 29, 2020
 
February 23, 2019
Net sales
 
$
227,101

 
$
123,800

 
$
379,254

 
$
244,731

Cost of goods sold
 
141,707

 
74,145

 
231,654

 
143,156

Gross profit
 
85,394

 
49,655

 
147,600

 
101,575

 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
Selling and marketing
 
27,041

 
14,729

 
45,475

 
30,048

General and administrative
 
28,103

 
13,732

 
46,248

 
25,730

Depreciation and amortization
 
4,287

 
1,902

 
6,740

 
3,751

Business transaction costs
 
694

 
290

 
26,853

 
1,329

Loss in fair value change of contingent consideration - TRA liability
 

 

 

 
533

Total operating expenses
 
60,125

 
30,653

 
125,316

 
61,391

 
 
 
 
 
 
 
 
 
Income from operations
 
25,269

 
19,002

 
22,284

 
40,184

 
 
 
 
 
 
 
 
 
Other (expense) income:
 
 
 
 
 
 
 
 
Interest income
 
85

 
884

 
1,464

 
1,665

Interest expense
 
(10,589
)
 
(3,344
)
 
(15,558
)
 
(6,605
)
Gain on settlement of TRA liability
 

 

 

 
1,534

Gain (loss) on foreign currency transactions
 
(194
)
 
130

 
(178
)
 
(268
)
Other income
 
8

 
77

 
45

 
121

Total other expense
 
(10,690
)
 
(2,253
)
 
(14,227
)
 
(3,553
)
 
 
 
 
 
 
 
 
 
Income before income taxes
 
14,579

 
16,749

 
8,057

 
36,631

Income tax expense
 
3,922

 
4,027

 
2,193

 
8,652

Net income
 
$
10,657

 
$
12,722

 
$
5,864

 
$
27,979

 
 
 
 
 
 
 
 
 
Other comprehensive income:
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
 
(141
)
 
(179
)
 
(141
)
 
(37
)
Comprehensive income
 
$
10,516

 
$
12,543

 
$
5,723

 
$
27,942

 
 
 
 
 
 
 
 
 
Earnings per share from net income:
 
 
 
 
 
 
 
 
Basic
 
$
0.11

 
$
0.16

 
$
0.06

 
$
0.35

Diluted
 
$
0.11

 
$
0.15

 
$
0.06

 
$
0.33

Weighted average shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
95,339,489

 
81,900,352

 
92,524,061

 
79,595,330

Diluted
 
100,336,571

 
85,350,196

 
97,597,614

 
84,062,479


6



The Simply Good Foods Company and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited, dollars in thousands)
 
 
Twenty-Six Weeks Ended
 
 
February 29, 2020
 
February 23, 2019
Operating activities
 
 
 
 
Net income
 
$
5,864

 
$
27,979

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
7,119

 
3,825

Amortization of deferred financing costs and debt discount
 
1,569

 
668

Stock compensation expense
 
3,795

 
2,478

Loss on fair value change of contingent consideration - TRA liability
 

 
533

Gain on settlement of TRA liability
 

 
(1,534
)
Unrealized (gain) loss on foreign currency transactions
 
178

 
268

Deferred income taxes
 
2,485

 
8,463

Loss on disposal of property and equipment
 

 
6

Amortization of operating lease right-of-use asset
 
1,652

 

Other
 
789

 

Changes in operating assets and liabilities, net of acquisition:
 
 
 
 
Accounts receivable, net
 
(19,062
)
 
(8,774
)
Inventories
 
768

 
(15,855
)
Prepaid expenses
 
(873
)
 
(384
)
Other current assets
 
(5,808
)
 
(2,092
)
Accounts payable
 
(2,953
)
 
6,143

Accrued interest
 
175

 
1,949

Accrued expenses and other current liabilities
 
(8,760
)
 
(1,810
)
Other assets and liabilities
 
(1,824
)
 
(32
)
Net cash (used in) provided by operating activities
 
(14,886
)
 
21,831

 
 
 
 
 
Investing activities
 
 
 
 
Purchases of property and equipment
 
(481
)
 
(887
)
Issuance of note receivable
 
(1,250
)
 

Acquisition of business, net of cash acquired
 
(984,201
)
 

Net cash (used in) investing activities
 
(985,932
)
 
(887
)
 
 
 
 
 
Financing activities
 
 
 
 
Proceeds from option exercises
 
931

 
361

Tax payments related to issuance of restricted stock units
 
(80
)
 
(5
)
Payments on finance lease obligations
 
(157
)
 

Cash received from warrant exercises
 

 
113,464

Repurchase of common stock
 

 
(127
)
Settlement of TRA liability
 

 
(26,468
)
Principal payments of long-term debt
 
(21,000
)
 
(1,000
)
Proceeds from issuance of common stock
 
352,542

 

Equity issuance costs
 
(3,323
)
 

Proceeds from issuance of long term debt
 
460,000

 

Deferred financing costs
 
(8,208
)
 

Net cash provided by financing activities
 
780,705

 
86,225

 
 
 
 
 
Cash and cash equivalents
 
 
 
 
Net (decrease) increase in cash
 
(220,113
)
 
107,169

Effect of exchange rate on cash
 
(113
)
 
(243
)
Cash at beginning of period
 
266,341

 
111,971

Cash and cash equivalents at end of period
 
$
46,115

 
$
218,897


7



Reconciliation of Adjusted EBITDA

Adjusted EBITDA. Adjusted EBITDA is a non-GAAP financial measure commonly used in our industry and should not be construed as an alternative to net (loss) income as an indicator of operating performance or as an alternative to cash flow provided by operating activities as a measure of liquidity (each as determined in accordance with GAAP). Simply Good Foods defines Adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) as net (loss) income before interest income, interest expense, income tax expense (benefit), depreciation and amortization with further adjustments to exclude the following items: business transaction costs, stock-based compensation expense, inventory step-up, integration costs, non-core legal costs, loss in fair value change of contingent consideration - TRA liability, gain on settlement of TRA liability and other non-core expenses. The Company believes that the inclusion of these supplementary adjustments in presenting Adjusted EBITDA, when used in conjunction with net (loss) income, are appropriate to provide additional information to investors, reflects more accurately operating results of the on-going operations, enhances the overall understanding of past financial performance and future prospects and allows for greater transparency with respect to the key metrics the Company uses in its financial and operational decision making. The Company also believes that Adjusted EBITDA is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in its industry. Adjusted EBITDA may not be comparable to other similarly titled captions of other companies due to differences in the non-GAAP calculation.

The following unaudited tables below provide a reconciliation of Adjusted EBITDA to its most directly comparable GAAP measure, which is net (loss) income, for the thirteen and twenty-six weeks ended February 29, 2020 and February 23, 2019:
Adjusted EBITDA Reconciliation:
(in thousands)
 
Thirteen Weeks Ended
 
Twenty-Six Weeks Ended
 
February 29, 2020
 
February 23, 2019
 
February 29, 2020
 
February 23, 2019
Net income
 
10,657

 
12,722

 
5,864

 
27,979

Interest income
 
(85
)
 
(884
)
 
(1,464
)
 
(1,665
)
Interest expense
 
10,589

 
3,344

 
15,558

 
6,605

Income tax expense
 
3,922

 
4,027

 
2,193

 
8,652

Depreciation and amortization
 
4,594

 
1,939

 
7,119

 
3,825

EBITDA
 
29,677

 
21,148

 
29,270

 
45,396

Business transaction costs
 
694

 
290

 
26,853

 
1,329

Stock-based compensation expense
 
2,122

 
1,417

 
3,795

 
2,478

Inventory step-up
 
5,085

 

 
7,522

 

Integration of Quest
 
3,903

 

 
5,341

 

Restructuring
 

 
22

 

 
22

Non-core legal costs
 
76

 
208

 
555

 
1,150

Loss in fair value change of contingent consideration - TRA liability
 

 

 

 
533

Gain on settlement of TRA liability
 

 

 

 
(1,534
)
Other (1)
 
174

 
(120
)
 
190

 
289

Adjusted EBITDA
 
$
41,731

 
$
22,965

 
$
73,526

 
$
49,663

(1) Other items consist principally of exchange impact of foreign currency transactions, frozen licensing media and other expenses.

    


8



Reconciliation of Adjusted Diluted Earnings Per Share

Adjusted Diluted Earnings per Share. Adjusted Diluted Earnings per Share is a non-GAAP financial measure commonly used in our industry and should not be construed as an alternative to diluted earnings per share as an indicator of operating performance. Simply Good Foods defines Adjusted Diluted Earnings Per Share as diluted earnings (loss) per share before depreciation and amortization, business transaction costs, stock-based compensation expense, inventory step-up, integration costs, non-core legal costs, change in fair value of contingent consideration - TRA liability, gain on settlement of TRA liability and other non-core expenses, on a theoretical tax effected basis of such adjustments at an assumed statutory rate. The Company believes that the inclusion of these supplementary adjustments in presenting Adjusted Diluted Earnings per Share, when used in conjunction with diluted earnings per share, are appropriate to provide additional information to investors, reflects more accurately operating results of the on-going operations, enhances the overall understanding of past financial performance and future prospects and allows for greater transparency with respect to the key metrics the Company uses in its financial and operational decision making. The Company also believes that Adjusted Diluted Earnings per Share is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in its industry. Adjusted Diluted Earnings per Share may not be comparable to other similarly titled captions of other companies due to differences in the non-GAAP calculation.

The following unaudited tables below provide a reconciliation of Adjusted Diluted Earnings Per Share to its most directly comparable GAAP measure, which is diluted earnings per share, for the thirteen and twenty-six weeks ended February 29, 2020 and February 23, 2019, and fifty three weeks ended August 31, 2019:
 
 
Thirteen Weeks Ended
 
Twenty-Six Weeks Ended
 
53-Weeks Ended
 
 
February 29, 2020
 
February 23, 2019
 
February 29, 2020
 
February 23, 2019
 
August 31, 2019
Diluted earnings per share
 
$
0.11

 
$
0.15

 
$
0.06

 
$
0.33

 
$
0.56

 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
0.03

 
0.02

 
0.05

 
0.03

 
0.07

Business transaction costs
 
0.01

 

 
0.20

 
0.01

 
0.06

Stock-based compensation expense
 
0.02

 
0.01

 
0.03

 
0.02

 
0.05

Inventory step-up
 
0.04

 

 
0.06

 

 

Integration of Quest
 
0.03

 

 
0.04

 

 

Restructuring
 

 

 

 

 
 
Non-core legal costs
 

 

 

 
0.01

 
0.04

Loss (gain) in fair value change of contingent consideration - TRA liability
 

 

 

 

 

Gain on settlement of TRA liability
 

 

 

 
(0.01
)
 
(0.01
)
Other (1)
 

 

 

 

 

Rounding (2)
 
(0.01
)
 

 
0.01

 

 
 
Adjusted diluted earnings per share
 
$
0.23

 
$
0.18

 
$
0.45

 
$
0.39

 
$
0.77

(1) Other items consist principally of exchange impact of foreign currency transactions, frozen licensing media, restructuring and other expenses.
(2) Adjusted Diluted Earnings Per Share amounts are computed independently for each quarter. Therefore, the sum of the quarterly Adjusted Diluted Earnings Per Share amounts may not equal the year to date Adjusted Diluted Earnings Per Share amounts due to rounding.


9

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