Benzinga | May 14, 2021 08:42AM EDT

The Simply Good Foods Announces Response to SEC Guidance Applicable to Warrants Issued by Special Purpose Acquisition Companies

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 announced in a Current Report on Form 8-K, that as a result of recently issued guidance provided by the staff of the Securities and Exchange Commission on April 12, 2021 for all SPAC-related companies regarding the classification of their warrants for accounting and reporting purposes (the "Statement"), it will restate its previously issued audited consolidated financial statements for the fiscal years ended August 29, 2020, August 31, 2019 and August 25, 2018 and unaudited condensed consolidated financial statements for the fiscal quarters ended November 28, 2020 and February 27, 2021.



The restatement pertains to the accounting treatment for public warrants and private placement warrants that were outstanding at the time of the Simply Good Foods' business combination with Conyers Park Acquisition Corp. on July 7, 2017. Consistent with market practice among SPACs, Simply Good Foods had been accounting for the warrants as equity under a fixed accounting model. However, consistent with the SEC's recently issued Statement, Simply Good Foods intends to restate historical financial statements such that the warrants are accounted for as liabilities and marked-to-market each reporting period (the "restatement"). In general, under the mark-to-market accounting model, as the stock price of Simply Good Foods' common stock increases, the warrant liability increases, and Simply Good Foods recognizes additional non-operating, non-cash expense in its income statement -- with the opposite when the stock price of its common stock declines.

As a result of the restatement and the increase in the stock price of its Common Stock over the applicable period, Simply Good Foods expects to recognize an incremental liability on its balance sheet of $110 million to $130 million for the fiscal quarter ended February 27, 2021. Simply Good Foods expects the restatement will not affect its historically reported cash and cash equivalents, or cash flows from operating, investing or financing activities, and will not affect its previously communicated non-GAAP operating metrics for fiscal year 2020 or any periods in fiscal 2021, including Adjusted EBITDA. These estimates are subject to change as management completes the restatement, and Simply Good Foods' independent registered public accounting firms have not audited or reviewed these estimates or ranges. As a result, the expected financial effect described above is preliminary and subject to change.

Finally, as of today, Simply Good Foods has approximately 6.7 million private placement warrants outstanding, which represents approximately one-third of the warrants originally issued, as all public warrants and forward purchase warrants have since been exercised or redeemed.