Business Combination (Tables)

6 Months Ended

Feb. 29, 2020

Schedule of Business Acquisitions, by Acquisition [Table Text Block]

The following table sets forth the preliminary purchase price of the Acquisition of Quest to the estimated fair value of the net assets acquired at the date of acquisition, subject to finalization per the terms of the Purchase Agreement. The preliminary purchase price allocation may be adjusted as a result of the finalization of our purchase price allocation procedures related to the assets acquired and liabilities assumed. The preliminary November 7, 2019 fair value is as follows:



(In thousands)
Assets acquired:
Cash and cash equivalents	$	4,745
Accounts receivable, net	26,537
Inventories	43,091
Prepaid assets	1,214
Other current assets	3,821
Property and equipment, net⁽¹⁾	10,363
Intangible assets, net⁽²⁾	848,375
Other long-term assets	20,997
Liabilities assumed:
Accounts payable	25,200
Other current liabilities	11,237
Deferred income taxes⁽³⁾	14,158
Other long-term liabilities	18,891
Total identifiable net assets	889,657
Goodwill⁽⁴⁾	99,289
Total assets acquired and liabilities assumed	$	988,946

Business Combination, Revenues of Acquired Entity

The results of Quest's operations have been included in the Simply Good Foods' Consolidated Financial Statements since November 7, 2019, the date of acquisition. The following table provides net sales from the acquired Quest business included in the Company's results:



	Thirteen Weeks Ended		Twenty-Six Weeks Ended
	February 29, 2020		February 29, 2020
Net sales	$	88,305	$	105,387

Business Acquisition, Pro Forma Information [Table Text Block]

Pro forma financial information is not intended to represent or be indicative of the actual results of operations of the combined business that would have been reported had the Acquisition of Quest been completed at the beginning of the fiscal year 2019, nor is it representative of future operating results of the Company.

This unaudited pro forma combined financial information is prepared based on Article 11 of Regulation S-X period end guidance. The Company and the legacy Quest entity have different fiscal year ends, with Simply Good Foods’ fiscal year being the last Saturday of August while the legacy Quest business fiscal year end was December 31. Because the year ends differ by more than 93 days, Quest's financial information is required to be adjusted to a period within 93 days of Simply Good Foods’ fiscal period end. For the purposes of preparing the unaudited pro forma combined financial information for the thirteen weeks ended February 23, 2019, Quest’s unaudited consolidated statement of operations for the three months ended December 31, 2018 was derived by deducting the historical unaudited consolidated statement of operations for the nine months ended September 30, 2018, from the unaudited consolidated statement of operations for the fiscal year ended December 31, 2018. For the purposes of preparing the unaudited pro forma combined financial information for the twenty-six weeks ended February 23, 2019, Quest’s unaudited consolidated statement of operations for the six months ended December 31, 2018 was derived by deducting the historical unaudited consolidated statement of operations for the six months ended June 30, 2018, from the unaudited consolidated statement of operations for the fiscal year ended December 31, 2018.

In addition to the above period end adjustments, the pro forma results include certain adjustments, as required under ASC 805, which are different than Article 11 pro forma requirements. ASC 805 requires pro forma adjustments to reflect the effects of fair value adjustments, transaction costs, capital structure changes, the tax effects of such adjustments, and also requires nonrecurring adjustments be prepared as though the Acquisition of Quest had occurred as of the beginning of the earliest period presented. The adjustments to the historical Quest financial results include the exclusion of legacy derivatives and interest expense that were settled in the execution of the Acquisition of Quest. Additional adjustments include non recurring transaction costs and the portion of the inventory fair value adjustment recorded by the Company during the thirteen weeks ended and twenty-six weeks ended February 29, 2020. Both periods were further adjusted to reflect a full period of (a) fair value adjustments related to inventory and incremental customer relationship amortization, (b) interest expense with the higher principal and interest rates associated with the Company's new term loan debt incurred to finance, in part, the Acquisition of Quest, and (c) the effects of the adjustments on income taxes and net income.

The following unaudited pro forma combined financial information presents combined results of the Company and Quest as if the Acquisition of Quest has occurred at the beginning of fiscal 2019:



	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	February 29, 2020		February 23, 2019		February 29, 2020		February 23, 2019
Revenue	$	227,101	$	202,802	$	447,657	$	392,747
Gross profit	$	90,479	$	75,361	$	178,667	$	136,948
Net income (loss)	$	15,049	$	11,837	$	30,697	$	(7,246	)