This Quarterly Report on Form 10-Q (this "Report") contains forward-looking statements. When used anywhere in this Report, the words "expect," "believe," "anticipate," "estimate," "intend," "plan" and similar expressions are intended to identify forward-looking statements. These statements relate to future events or our future financial or operational performance and involve known and unknown risks, uncertainties and other factors that could cause our actual results, levels of activity, performance or achievements to differ materially from those expressed or implied by these forward-looking statements. These statements include, but are not limited to, the effect of the COVID-19 pandemic on our business, financial condition and results of operations, our expectations regarding our supply chain, including but not limited to, raw materials and logistics costs, and the effect of price increases. We disclaim any undertaking to publicly update or revise any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. These statements reflect our current views with respect to future events and are based on assumptions subject to risks and uncertainties. Such risks and uncertainties include those related to our ability to sell our products. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year endedAugust 28, 2021 ("Annual Report") and our unaudited condensed consolidated financial statements and the related notes appearing elsewhere in this Report. In addition to historical information, the following discussion contains forward-looking statements, including, but not limited to, statements regarding the Company's expectation for future performance, liquidity and capital resources that involve risks, uncertainties and assumptions that could cause actual results to differ materially from the Company's expectations. The Company's actual results may differ materially from those contained in or implied by any forward-looking statements. Factors that could cause such differences include those identified in Item 1A. "Risk Factors" of our Annual Report. The Company assumes no obligation to update any of these forward-looking statements.
Unless the context requires otherwise in this Report, the terms "we," "us,"
"our," the "Company" and "
Overview
The Simply Good Foods Company is a consumer packaged food and beverage company that aims to lead the nutritious snacking movement with trusted brands that offer a variety of convenient, innovative, great-tasting, better-for-you snacks and meal replacements. The product portfolio we develop, market and sell consists primarily of protein bars, ready-to-drink ("RTD") shakes, sweet and salty snacks and confectionery products marketed under the Atkins®, Atkins Endulge®, and Quest® brand names. We believeSimply Good Foods is poised to expand its wellness platform through innovation and organic growth along with acquisition opportunities in the nutritional snacking space. Our nutritious snacking platform consists of brands that specialize in providing products for consumers that follow certain nutritional philosophies and health-and-wellness trends: Atkins® for those following a low-carb lifestyle and Quest® for consumers seeking a variety of protein-rich foods and beverages that also limit sugars and simple carbs. We distribute our products in major retail channels, primarily inNorth America , including grocery, club, and mass merchandise, as well as through e-commerce, convenience, specialty, and other channels. Our portfolio of nutritious snacking brands gives us a strong platform with which to introduce new products, expand distribution, and attract new consumers to our products.
Effects of COVID-19
For the thirteen weeks endedNovember 27, 2021 , our business improved from the end of fiscal year 2021, driven in part by the increasing normalization of consumer mobility and shopper traffic patterns in brick and mortar retailers versus prior periods that were pressured by COVID-19 movement restrictions. The improvement in consumer mobility and shopper traffic patterns however remains fragile and there continues to be uncertainty related to the sustainability and longevity of these trends. In addition, these positive trends could be negatively affected by an increase in the number and rate of reported positive cases of COVID-19, especially resulting from new variants of the virus, along with any government actions to reimpose mobility restrictions. During fiscal year 2022, we expect our business performance will continue to be affected by the level of consumer mobility, which includes the rate at which consumers return to working outside the home. We have actively engaged with the various elements of our value chain, including our retail customers, contract manufacturers, and logistics and transportation providers, to meet demand for our products and to remain informed of any challenges within our value chain. Although consumer consumption habits have become steadier, inventory levels remain variable. Based on information available to us as of the date of this Report, we believe we will be able to deliver products at acceptable levels to fulfil customer orders on a timely basis; therefore, we expect our products will continue to be available for purchase to meet consumer meal replacement and snacking needs 19 -------------------------------------------------------------------------------- for the foreseeable future. We continue to monitor customer and consumer demand along with our logistics capabilities and intend to adapt our plans as needed to continue to drive our business and meet our obligations during the continuing and evolving COVID-19 situation. We remain uncertain of the ultimate effect COVID-19 could have on our business notwithstanding the distribution of severalU.S. government approved vaccines, the availability of booster inoculations and the easing of movement restrictions relative to the onset of COVID-19. This uncertainty stems from the potential for, among other things, (i) the rise of COVID-19 mutations that have resulted in increased rates of reported cases for which currently approved vaccines are or may not be as effective, (ii) unexpected supply chain disruptions, including disruptions resulting from labor shortages or other human capital challenges, (iii) changes to customer operations, (iv) a reversal in recently improving consumer purchasing and consumption behavior, and (v) the closure of or reduced access to customer establishments.
Restructuring and Related Charges
InMay 2020 , we announced certain restructuring activities in conjunction with the implementation of our future-state organization design, which created a fully integrated organization with our completed acquisition ofQuest Nutrition, LLC onNovember 7, 2019 . The new organization design became effective onAugust 31, 2020 . These restructuring plans primarily include workforce reductions, changes in management structure, and the relocation of business activities from one location to another. Total restructuring and restructuring-related costs incurred in the thirteen weeks endedNovember 27, 2021 were immaterial. We incurred a total of$2.5 million in restructuring and restructuring-related costs in the thirteen weeks endedNovember 28, 2020 . The effect of these restructuring activities has been included within General and administrative on the Condensed Consolidated Statements of Operations and Comprehensive Income. Since the restructuring activities were announced inMay 2020 , we have incurred aggregate restructuring and restructuring-related costs of$9.9 million . Overall, we expect to incur a total of approximately$10.1 million in restructuring and restructuring-related costs, including the$9.9 million previously incurred, and the balance of which will be paid through the second quarter of fiscal year 2022. As ofNovember 27, 2021 , the outstanding restructuring liability was$0.1 million . Refer to Note 13, Restructuring and Related Charges, of our Notes to Unaudited Condensed Consolidated Financial Statements in this Report for additional information regarding restructuring activities.
SimplyProtein Sale
EffectiveSeptember 24, 2020 , we sold the assets exclusively related to our SimplyProtein® brand of products for approximately$8.8 million of consideration, including cash of$5.8 million and a note receivable for$3.0 million , to a newly formed entity led by the Company's former Canadian-based management team who had been responsible for this brand prior to the sale transaction (the "SimplyProtein Sale"). In addition to purchasing these assets, the buyer assumed certain liabilities related to the SimplyProtein® brand's business. There was no gain or loss recognized as a result of the SimplyProtein Sale. The transaction has enabled our management to focus its full time and resources on our core Atkins® and Quest® branded businesses and other strategic initiatives. Supply Chain We expect higher raw material and logistics costs in fiscal year 2022. As a result, we instituted a price increase effective inSeptember 2021 , the first month of our fiscal year 2022. Management believes the price increase and cost savings initiatives will enable us to continue to invest in projects that drive growth. We have begun to see logistics challenges, which we believe have contributed to lower retail and e-commerce sales of our products due to out-of-stock situations, delayed recognition of sales and higher than historical inventory levels. In addition, we could experience additional lost sale opportunities at our retail and e-commerce customers if our products are not available for purchase as a result of disruptions in our supply chain relating to an inability to obtain ingredients or packaging, labor challenges at our logistics providers or our contract manufacturers, or if our customers experience delays in stocking our products. 20 --------------------------------------------------------------------------------
Key Financial Definitions
Net sales. Net sales consist primarily of product sales less the cost of promotional activities, slotting fees and other sales credits and adjustments, including product returns.
Cost of goods sold. Cost of goods sold consists primarily of the costs we pay to our contract manufacturing partners to produce the products sold. These costs include the purchase of raw ingredients, packaging, shipping and handling, warehousing, depreciation of warehouse equipment, and a tolling charge for the contract manufacturer. Cost of goods sold includes products provided at no charge as part of promotions and the non-food materials provided with customer orders.
Operating expenses. Operating expenses consist primarily of selling and marketing, general and administrative, depreciation and amortization, and business transaction costs. The following is a brief description of the components of operating expenses:
•Selling and marketing. Selling and marketing expenses comprise broker commissions, customer marketing, media and other marketing costs.
•General and administrative. General and administrative expenses comprise expenses associated with corporate and administrative functions that support our business, including employee compensation, stock-based compensation, professional services, integration costs, restructuring costs, insurance and other general corporate expenses. •Depreciation and amortization. Depreciation and amortization costs consist of costs associated with the depreciation of fixed assets and capitalized leasehold improvements and amortization of intangible assets.
Results of Operations
Sales and earnings growth improved for both the Atkins® and Quest® brands during the thirteen weeks endedNovember 27, 2021 , driven by improving consumer mobility and shopper trips compared to the thirteen weeks endedNovember 28, 2020 , as well as increasing household penetration and innovation that continues to resonate with consumers. As a result of the price increase effective inSeptember 2021 as well as favorable product form and retail channel mix, we were able to more than offset the unfavorable effects of higher raw material costs, logistics costs, and supply chain challenges in the thirteen weeks endedNovember 27, 2021 and achieve gross margin expansion and earnings growth. As previously discussed above in "Supply Chain," we continue to expect to have higher raw material and logistics costs in fiscal year 2022 as compared to fiscal year 2021. In assessing the performance of our business, we consider a number of key performance indicators used by management and typically used by our competitors, including the non-GAAP measures EBITDA and Adjusted EBITDA. Because not all companies use identical calculations, the presentation of EBITDA and Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. See "Reconciliation of EBITDA and Adjusted EBITDA" below for a reconciliation of EBITDA and Adjusted EBITDA to net income for each applicable period. 21 -------------------------------------------------------------------------------- Table of Contents Comparison of Unaudited Results for the Thirteen Weeks EndedNovember 27, 2021 and the Thirteen Weeks EndedNovember 28, 2020 The following unaudited table presents, for the periods indicated, selected information from our Condensed Consolidated Statements of Operations and Comprehensive Income, including information presented as a percentage of net sales: Thirteen Weeks Thirteen Weeks Ended Ended November 27, % of Sales November 28, % of Sales (In thousands) 2021 2020 Net sales$ 281,265 100.0 %$ 231,152 100.0 % Cost of goods sold 164,710 58.6 % 137,111 59.3 % Gross profit 116,555 41.4 % 94,041 40.7 % Operating expenses: Selling and marketing 30,527 10.9 % 25,195 10.9 % General and administrative 23,702 8.4 % 25,415 11.0 % Depreciation and amortization 4,320 1.5 % 4,244 1.8 % Total operating expenses 58,549 20.8 % 54,854 23.7 % Income from operations 58,006 20.6 % 39,187 17.0 % Other income (expense): Interest income 1 - % 3 - % Interest expense (6,371) (2.3) % (8,372) (3.6) % (Loss) gain in fair value change of warrant liability (17,317) (6.2) % 20,453 8.8 % (Loss) gain on foreign currency transactions (353) (0.1) % 9 - % Other income 9 - % 47 - % Total other (expense) income (24,031) (8.5) % 12,140 5.3 % Income before income taxes 33,975 12.1 % 51,327 22.2 % Income tax expense 12,823 4.6 % 8,374 3.6 % Net income$ 21,152 7.5 %$ 42,953 18.6 % Other financial data: Adjusted EBITDA (1)$ 65,615 23.3 %$ 48,697 21.1 %
(1) Adjusted EBITDA is a non-GAAP financial metric. See "Reconciliation of EBITDA and Adjusted EBITDA" below for a reconciliation of net income to EBITDA and Adjusted EBITDA for each applicable period.
Net sales. Net sales of$281.3 million represented an increase of$50.1 million , or 21.7%, for the thirteen weeks endedNovember 27, 2021 compared to the thirteen weeks endedNovember 28, 2020 . The increase was primarily attributable to retail sales volume growth and e-commerce growth for both the Atkins® and Quest® brands, which increased ourNorth America net sales by 24.5% in the thirteen weeks endedNovember 27, 2021 compared to the thirteen weeks endedNovember 28, 2020 . Additionally, we instituted a price increase effective inSeptember 2021 , the first month of our fiscal year 2022. The increase in net sales was partially offset by a 27.3% decline in our international business due to the European exit. The European exit represented a 1.6% headwind to total Company net sales growth. Cost of goods sold. Cost of goods sold increased$27.6 million , or 20.1%, for the thirteen weeks endedNovember 27, 2021 compared to the thirteen weeks endedNovember 28, 2020 . The cost of goods sold increase was driven by the sales volume growth for both the Atkins® and Quest® brands, as discussed above. Additionally, our cost of goods sold for the thirteen weeks endedNovember 27, 2021 was unfavorably affected by higher raw material costs, logistics costs, and supply chain challenges. As previously discussed above in "Supply Chain," we continue to expect to have higher raw material and logistics costs in fiscal year 2022 as compared to fiscal year 2021. Gross profit. Gross profit increased$22.5 million , or 23.9%, for the thirteen weeks endedNovember 27, 2021 compared to the thirteen weeks endedNovember 28, 2020 , which was primarily driven by the sales volume growth for both the Quest® and Atkins® 22 -------------------------------------------------------------------------------- Table of Contents brands as discussed above. Gross profit of$116.6 million , or 41.4% of net sales, for the thirteen weeks endedNovember 27, 2021 increased 70 basis points from 40.7% of net sales for the thirteen weeks endedNovember 28, 2020 . The increase in gross profit margin was primarily the result of the price increase which became effective inSeptember 2021 as well as favorable product form and retail channel mix given higher shopper traffic volume within brick and mortar retailers. The increase in gross profit margin was partially offset by the unfavorable effects of higher raw material costs, logistics costs, and supply chain challenges in the thirteen weeks endedNovember 27, 2021 as previously discussed. Operating expenses. Operating expenses increased$3.7 million , or 6.7%, for the thirteen weeks endedNovember 27, 2021 compared to the thirteen weeks endedNovember 28, 2020 due to the following: •Selling and marketing. Selling and marketing expenses increased$5.3 million , or 21.2%, for the thirteen weeks endedNovember 27, 2021 compared to the thirteen weeks endedNovember 28, 2020 . The increase was primarily related to additional brand building initiatives for both Atkins® and Quest® in the thirteen weeks endedNovember 27, 2021 compared to the thirteen weeks endedNovember 28, 2020 . •General and administrative. General and administrative expenses decreased$1.7 million , or 6.7%, for the thirteen weeks endedNovember 27, 2021 compared to the thirteen weeks endedNovember 28, 2020 . The decrease was primarily attributable to reductions in costs related to business integration activities of$1.2 million and restructuring charges of$2.5 million in the thirteen weeks endedNovember 27, 2021 compared to the thirteen weeks endedNovember 28, 2020 . These decreases were partially offset by an increase in incentive compensation, including an increase of stock-based compensation of$1.5 million , in the thirteen weeks endedNovember 27, 2021 compared to the thirteen weeks endedNovember 28, 2020 . •Depreciation and amortization. Depreciation and amortization expenses remained approximately flat at$4.3 million for the thirteen weeks endedNovember 27, 2021 and$4.2 million for theNovember 28, 2020 .
Interest income. Interest income was nominal for each of the thirteen weeks
ended
Interest expense. Interest expense decreased$2.0 million for the thirteen weeks endedNovember 27, 2021 compared to the thirteen weeks endedNovember 28, 2020 , primarily due to principal payments reducing the outstanding balance of the Term Facility (as defined below) to$431.5 million as ofNovember 27, 2021 from$581.5 million as ofNovember 28, 2020 . Additionally, interest expense related to the amortization of deferred financing costs and debt discount decreased$0.3 million for the thirteen weeks endedNovember 27, 2021 compared to the thirteen weeks endedNovember 28, 2020 . (Loss) gain in fair value change of warrant liability. During thirteen weeks endedNovember 27, 2021 andNovember 28, 2020 , we recorded a non-cash loss of$17.3 million and a non-cash gain of$20.5 million , respectively, related to changes in valuation of our liability-classified warrants issued through a private placement ("Private Warrants"), which is primarily driven by movements in our stock price.
(Loss) gain on foreign currency transactions. A loss of
Income tax expense. Income tax expense increased$4.4 million for the thirteen weeks endedNovember 27, 2021 compared to the thirteen weeks endedNovember 28, 2020 . The increase in our income tax expense is primarily driven by higher income from operations, partially offset by changes in permanent differences. Net income. Net income was$21.2 million for the thirteen weeks endedNovember 27, 2021 , a decrease of$21.8 million compared to net income of$43.0 million for the thirteen weeks endedNovember 28, 2020 . The decrease in net income was primarily driven by the non-cash fair value loss of$17.3 million in the thirteen weeks endedNovember 27, 2021 compared to a non-cash fair value gain of$20.5 million in the thirteen weeks endedNovember 28, 2020 related to the measurement of our liability-classified Private Warrants, which was partially offset by increased income from operations driven by the Atkins® and Quest® brand sales volume growth as discussed above. Adjusted EBITDA. Adjusted EBITDA increased$16.9 million , or 34.7% for the thirteen weeks endedNovember 27, 2021 compared to the thirteen weeks endedNovember 28, 2020 , driven primarily by sales volume growth for the Atkins® and Quest® brands as discussed above. For a reconciliation of Adjusted EBITDA to its most directly comparable GAAP measure, see "Reconciliation of EBITDA and Adjusted EBITDA" below. 23 -------------------------------------------------------------------------------- Table of Contents Reconciliation of EBITDA and Adjusted EBITDA EBITDA and Adjusted EBITDA are non-GAAP financial measures commonly used in our industry and should not be construed as alternatives to net income as an indicator of operating performance or as alternatives to cash flow provided by operating activities as a measure of liquidity (each as determined in accordance with GAAP).Simply Good Foods defines EBITDA as net income or loss before interest income, interest expense, income tax expense, depreciation and amortization, and Adjusted EBITDA as further adjusted to exclude the following items: stock-based compensation expense, integration costs, restructuring costs, gain or loss in fair value change of warrant liability, and other non-core expenses. The Company believes that EBITDA and Adjusted EBITDA, when used in conjunction with net income, are useful to provide additional information to investors. Management of the Company uses EBITDA and Adjusted EBITDA to supplement net income because these measures reflect operating results of the on-going operations, eliminate items that are not directly attributable to the Company's underlying operating performance, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to the key metrics the Company's management uses in its financial and operational decision making. 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 table provides a reconciliation of EBITDA and Adjusted EBITDA to its most directly comparable GAAP measure, which is net income, for the thirteen weeks endedNovember 27, 2021 andNovember 28, 2020 : Thirteen Weeks Ended (In thousands) November 27, 2021 November 28, 2020 Net income$ 21,152 $ 42,953 Interest income (1) (3) Interest expense 6,371 8,372 Income tax expense 12,823 8,374 Depreciation and amortization 4,741
4,513
EBITDA 45,086
64,209
Stock-based compensation expense 2,605 1,110 Integration of Quest 55 1,246 Restructuring 42 2,519
Loss (gain) in fair value change of
warrant liability 17,317 (20,453) Other (1) 510 66 Adjusted EBITDA$ 65,615 $ 48,697
(1) Other items consist principally of exchange impact of foreign currency transactions and
other expenses.
Liquidity and Capital Resources
Overview
We have historically funded our operations with cash flow from operations and, when needed, with borrowings under our Credit Agreement (as defined below). Our principal uses of cash have been working capital, debt service, and acquisition opportunities. We had$35.4 million in cash as ofNovember 27, 2021 . We believe our sources of liquidity and capital will be sufficient to finance our continued operations, growth strategy and additional expenses we expect to incur for at least the next twelve months. As circumstances warrant, we may issue debt and/or equity securities from time to time on an opportunistic basis, dependent upon market conditions and available pricing. We make no assurance that we can issue and sell such securities on acceptable terms or at all. Our material future cash requirements from contractual and other obligations relate primarily to our principal and interest payments for our Term Facility, as defined and discussed below, and our operating and finance leases. Refer to Note 5, Long-Term Debt and Line of Credit, and Note 8, Leases, of the Notes to Unaudited Condensed Consolidated Financial Statements in this Report for additional information related to the expected timing and amount of payments related to our contractual and other obligations.
Debt and Credit Facilities
OnJuly 7, 2017 , we entered into a credit agreement with Barclays Bank PLC and other parties (as amended to date, the "Credit Agreement"). The Credit Agreement at that time provided for (i) a term facility of$200.0 million ("Term Facility") with a seven-year maturity and (ii) a revolving credit facility of up to$75.0 million (the "Revolving Credit Facility") with a five-year maturity. Substantially 24 -------------------------------------------------------------------------------- Table of Contents concurrent with the consummation of the business combination betweenConyers Park Acquisition Corp. andNCP-ATK Holdings, Inc. onJuly 7, 2017 , the full$200.0 million of the Term Facility (the "Term Loan") was drawn. The interest rate per annum is based on either (i) a base rate equaling the higher of (a) the "prime rate," (b) the federal funds effective rate plus 0.50%, or (c) the Euro-currency rate applicable for an interest period of one month plus 1.00% plus (x) 3.00% margin for the Term Loan or (y) 2.00% margin for the Revolving Credit Facility, or (ii) London Interbank Offered Rate ("LIBOR") adjusted for statutory reserve requirements plus (x) 4.00% margin for the Term Loan subject to a floor of 1.00% or (y) 3.00% margin for the Revolving Credit Facility.The Simply Good Foods Company is not a borrower under the Credit Agreement and has not provided a guarantee of the Credit Agreement.Simply Good Foods USA, Inc. , is the administrative borrower and certain other subsidiary holding companies are co-borrowers under the Credit Agreement. Each of our domestic subsidiaries that is not a named borrower under the Credit Agreement has provided a guarantee on a secured basis. As security for the payment or performance of the debt under the Credit Agreement, the borrowers and the guarantors have pledged certain equity interests in their respective subsidiaries and granted the lenders a security interest in substantially all of their domestic assets. All guarantors other thanQuest Nutrition, LLC are holding companies with no assets other than their investments in their respective subsidiaries. OnMarch 16, 2018 (the "Amendment Date"), we entered into an amendment (the "Repricing Amendment") to the Credit Agreement. As a result of the Repricing Amendment, the interest rate on the Term Loan was reduced and, as of the Amendment Date, such loans had an interest rate equal to, at our option, either LIBOR plus an applicable margin of 3.50% or a base rate plus an applicable margin of 2.50%. The Repricing Amendment did not change the interest rate on the Revolving Credit Facility. The Revolving Credit Facility continued to bear interest based upon our consolidated net leverage ratio as of the last financial statements delivered to the administrative agent. No additional debt was incurred or any proceeds received by us in connection with the Repricing Amendment. The incremental fees paid to the administrative agent are reflected as additional debt discount and are amortized over the terms of the long-term financing agreements using the effective-interest method. OnNovember 7, 2019 , we entered into a second amendment (the "Incremental Facility Amendment") to the Credit Agreement to increase the principal borrowed on the Term Facility by$460.0 million . The Term Facility together with the incremental borrowing make up the Initial Term Loans (as defined in the Incremental Facility Amendment) and as of the Amendment No. 2 Effective Date (as defined in the Incremental Facility Amendment), the Initial Term Loans bear interest at a rate equal to, at our option, either LIBOR plus an applicable margin of 3.75% or a base rate plus an applicable margin of 2.75%. The Incremental Facility Amendment was executed to partially finance the acquisition ofQuest Nutrition, LLC onNovember 7, 2019 . No amounts under the Term Facility were repaid as a result of the execution of the Incremental Facility Amendment. Effective as ofDecember 16, 2021 , the Company entered into a third amendment (the "Extension Amendment") to the Credit Agreement. The Extension Amendment provides for an extension of the stated maturity date of the Revolving Commitments and Revolving Loans (each as defined in the Credit Agreement) fromJuly 7, 2022 to the earlier of (i) 91 days prior to the maturity date of the Initial Term Loans onJuly 7, 2024 and (ii)December 16, 2026 . The Applicable Rate per annum applicable to the loans under the Credit Agreement Amendment is, with respect to any Initial Term Loan that is an ABR Loan (as defined in the Credit Agreement), 2.75% per annum, and with respect to any Initial Term Loan that is a Eurodollar Loan, 3.75% per annum. The incremental term loans will mature on the maturity date applicable to the Initial Term Loans, which isJuly 7, 2024 . The Credit Agreement contains certain financial and other covenants that limit our ability to, among other things, incur and/or undertake asset sales and other dispositions, liens, indebtedness, certain acquisitions and investments, consolidations, mergers, reorganizations and other fundamental changes, payment of dividends and other distributions to equity and warrant holders, and prepayments of material subordinated debt, in each case, subject to customary exceptions materially consistent with credit facilities of such type and size. The Revolving Credit Facility has a maximum total net leverage ratio equal to or less than 6.00:1.00 contingent on credit extensions in excess of 30% of the total amount of commitments available under the Revolving Credit Facility. Any failure to comply with the restrictions of the credit facilities may result in an event of default. We were in compliance with all financial covenants as ofNovember 27, 2021 andAugust 28, 2021 , respectively. AtNovember 27, 2021 , the outstanding balance of the Term Facility was$431.5 million . We are not required to make principal payments on the Term Facility over the twelve months following the period endedNovember 27, 2021 . The outstanding balance of the Term Facility is due upon its maturity inJuly 2024 . As ofNovember 27, 2021 , there were no amounts drawn against the Revolving Credit Facility. 25 -------------------------------------------------------------------------------- Table of Contents Private Warrants to Purchase Common Stock As ofNovember 27, 2021 , we have outstanding liability-classified Private Warrants that allow holders to purchase 6,700,000 shares of the Company's common stock. Such Private Warrants are held byConyers Park Sponsor, LLC , a related party. Each whole warrant entitles the holder to purchase one share of the Company's common stock at a price of$11.50 per share. If all Private Warrants are exercised at the$11.50 exercise price per warrant, our cash would increase by$77.1 million . The warrants expire onJuly 7, 2022 or earlier upon redemption or liquidation, as applicable.
Cash Flows
The following table sets forth the major sources and uses of cash for each of the periods set forth below (in thousands):
Thirteen Weeks
Ended
November 27, 2021
Net cash (used in) provided by operating
activities $ (7,329) $
15,197
Net cash (used in) provided by investing
activities $ (4,377) $
5,593
Net cash used in financing activities $ (27,992) $
(25,122)
Operating activities. Our net cash (used in) provided by operating activities decreased$22.5 million to$7.3 million cash used in operating activities for the thirteen weeks endedNovember 27, 2021 compared to cash provided by operating activities of$15.2 million for the thirteen weeks endedNovember 28, 2020 . The decrease in cash provided by operating activities was primarily attributable to changes in working capital, including$14.0 million of accounts receivable, net,$14.2 million of accounts payable and$17.9 million of accrued expenses and other current liabilities due to timing of payments and receipts during the thirteen weeks endedNovember 27, 2021 . Additionally, seasonal building of inventory levels contributed to$15.3 million of negative working capital changes in inventory for the thirteen weeks endedNovember 27, 2021 . These decreases in cash provided by operating activities were partially offset by the$18.8 million increase in income from operations primarily attributable to retail sales volume growth and e-commerce growth for both the Atkins® and Quest® brands as discussed in "Results of Operations" above. Investing activities. Our net cash used in investing activities was$4.4 million for the thirteen weeks endedNovember 27, 2021 compared to net cash provided by investing activities of$5.6 million for the thirteen weeks endedNovember 28, 2020 . Our net cash used in investing activities for the thirteen weeks endedNovember 27, 2021 primarily comprised$2.7 million of purchases of property and equipment and the issuance of a$1.5 million note receivable. The$5.6 million of net cash provided by investing activities for the thirteen weeks endedNovember 28, 2020 primarily comprised the$5.8 million of cash proceeds received from the SimplyProtein Sale. Financing activities. Our net cash used in financing activities was$28.0 million for the thirteen weeks endedNovember 27, 2021 compared to$25.1 million for the thirteen weeks endedNovember 28, 2020 . Net cash used in financing activities for the thirteen weeks endedNovember 27, 2021 primarily consisted of$25.0 million in principal payments on the Term Facility and$3.2 million of tax payments related to issuance of restricted stock units and performance stock units. Net cash used in financing activities for the thirteen weeks endedNovember 28, 2020 primarily consisted of$25.0 million in principal payments on the Term Facility. New Accounting Pronouncements For a description of critical accounting policies that affect our significant judgments and estimates used in the preparation of our consolidated financial statements, refer to our Annual Report. Refer to Note 2, Summary of Significant Accounting Policies, of our unaudited interim consolidated financial statements in this Report for further information regarding recently issued accounting standards. 26
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