0001104659-21-066367.txt : 20210514
0001104659-21-066367.hdr.sgml : 20210514
20210514074239
ACCESSION NUMBER: 0001104659-21-066367
CONFORMED SUBMISSION TYPE: 8-K
PUBLIC DOCUMENT COUNT: 15
CONFORMED PERIOD OF REPORT: 20210514
ITEM INFORMATION: Results of Operations and Financial Condition
ITEM INFORMATION: Financial Statements and Exhibits
FILED AS OF DATE: 20210514
DATE AS OF CHANGE: 20210514
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: Whole Earth Brands, Inc.
CENTRAL INDEX KEY: 0001753706
STANDARD INDUSTRIAL CLASSIFICATION: SUGAR & CONFECTIONERY PRODUCTS [2060]
IRS NUMBER: 000000000
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 8-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-38880
FILM NUMBER: 21921952
BUSINESS ADDRESS:
STREET 1: 125 S. WACKER DRIVE
STREET 2: SUITE 3150
CITY: CHICAGO
STATE: IL
ZIP: 60606
BUSINESS PHONE: 312.8403005
MAIL ADDRESS:
STREET 1: 125 S. WACKER DRIVE
STREET 2: SUITE 3150
CITY: CHICAGO
STATE: IL
ZIP: 60606
FORMER COMPANY:
FORMER CONFORMED NAME: Act II Global Acquisition Corp.
DATE OF NAME CHANGE: 20190321
FORMER COMPANY:
FORMER CONFORMED NAME: ELLENOFF GROSSMAN & SCHOLE
DATE OF NAME CHANGE: 20190321
FORMER COMPANY:
FORMER CONFORMED NAME: Act II Global Acquisition Corp.
DATE OF NAME CHANGE: 20180920
8-K
1
tm2116399d1_8k.htm
FORM 8-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
May 14, 2021
Whole Earth Brands, Inc.
(Exact name of registrant as specified in its charter)
Delaware
001-38880
38-4101973
(State or other jurisdiction of incorporation)
(Commission File Number)
(IRS Employer Identification No.)
125 S. Wacker Drive
Suite 3150 Chicago, IL60606
(Address of principal executive offices, including
zip code)
Registrant’s telephone number, including
area code: (312) 840-6000
Not Applicable
(Former name or former address, if changed since
last report)
Check the appropriate box below if the Form 8-K
filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨
Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange
Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under
the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under
the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common stock, par value $0.0001 per share
FREE
The NASDAQ Stock Market LLC
Warrants to purchase one-half of one share of common stock
FREEW
The NASDAQ Stock Market LLC
Indicate by check mark whether the registrant
is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2
of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging
growth company x
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 2.02.
Results of Operations and Financial Condition.
On May 14, 2021, Whole Earth Brands, Inc. (the
“Company”) issued a press release announcing certain financial and other results for
the fiscal quarter and year ended March 31, 2021. The full text of the press release is furnished as Exhibit 99.1 to this Current Report
on Form 8-K (this “Current Report”) and is incorporated herein by reference.
The information
furnished under Item 2.02 of this Current Report (including Exhibit 99.1) shall not be deemed “filed” for purposes of Section
18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that
Section, nor shall it be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended,
or the Exchange Act, except as expressly set forth by specific reference in such filing.
Pursuant to the requirements
of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
Whole Earth Brands, Inc.
Dated: May 14, 2021
By:
/s/ Andrew Rusie
Name:
Andrew Rusie
Title:
Chief Financial Officer
EX-99.1
2
tm2116399d1_ex99-1.htm
EXHIBIT 99.1
Exhibit 99.1
Whole Earth Brands, Inc. Reports First Quarter
2021 Financial Results and Reiterates Full Year Guidance
First Quarter Branded CPG Segment Revenue Growth
of 103%, Reflecting Strategic Acquisitions of Swerve and Wholesome; Both Acquisitions are Fully Integrated
First Quarter Branded CPG Segment Proforma Organic
Constant Currency
Revenue Growth of 10%
Chicago, Illinois – May 14, 2021 –
Whole Earth Brands, Inc. (the “Company” or “we” or “our”) (Nasdaq: FREE), a global food company enabling
healthier lifestyles by providing access to premium plant-based sweeteners, flavor enhancers and other foods through a diverse portfolio
of trusted brands and delicious products, today announced its financial results for its first quarter ended March 31, 2021. The Company
also reiterated fiscal year 2021 guidance.
Irwin D. Simon, Executive Chairman, stated, “Our
expanded portfolio of brands continues to outpace the category growth rate and is confirmation of our strong positioning within the sweetener
category that is experiencing powerful tailwinds driven by an increasing movement toward health and wellness products. We have completely
transformed our Branded CPG business over the past ten months since becoming a public company and I’m excited by the speed at which
our acquisitions have been integrated and the value our new Branded CPG North America organization is creating. We look forward to continued
execution of our growth strategy by our team and are excited about the opportunities in 2021.”
Albert Manzone, Chief Executive Officer, commented,
“Our business is off to a strong start in 2021, generating proforma organic constant currency product revenue growth within the
Branded CPG segment of 10% and delivering $17.5 million of Adjusted EBITDA in the first quarter. Our portfolio of natural brands –
Whole Earth Sweetener, Swerve, and Wholesome Sweeteners Incorporated (“Wholesome”) – each performed exceptionally well
with double-digit revenue growth versus prior year. The integration of our acquisitions is fully complete and with our “Power of
One” strategy, our newly integrated North American team is focused on building our brands, bringing innovation to market, increasing
our market penetration and transforming our entire supply chain. We are further encouraged by the positive data regarding an economic
recovery including for the food service industry, and by the continued consumer preference shifts towards plant-based better-for-you alternatives,
all of which provide our business with near-term and long-term tailwinds.”
FIRST QUARTER 2021 HIGHLIGHTS
Our consolidated financials reflect both predecessor
and successor periods indicative of the June 25, 2020 business combination date. The first quarter results discussed below compare the
successor’s 2021 first quarter results ended March 31, 2021 to the predecessor’s 2020 first quarter results ended March 31,
2020.
1
Additionally, we completed the acquisition of
Swerve on November 10, 2020 and the Wholesome acquisition on February 5, 2021. Our reported results include Swerve and Wholesome from
those dates of acquisition.
·
Consolidated product revenues were $105.8 million,
an increase of 60.4% on a reported basis and an increase of 57.2% on a constant currency basis, as compared to the prior year first quarter.
On a proforma basis, including the impact of both acquisitions for the full quarter in both the current and prior year periods, organic
product revenue grew 7.9%, or increased 6.1% on a constant currency basis, compared to the prior year first quarter.
·
Branded CPG segment product revenues were $81.8
million, an increase of 103.4% and an increase of 98.1% on a constant currency basis, as compared to the prior year first quarter. Constant
currency results reflect the acquisitions of Wholesome and Swerve and strong growth in our natural brands. On a proforma basis, including
the impact of both acquisitions for the full quarter in both the current and prior year periods, organic constant-currency product revenue
grew 9.7%, compared to the prior year first quarter.
·
Flavors & Ingredients segment product revenues
were $24.0 million, a decrease of 6.7% in the first quarter, primarily due to a difficult comparison to the prior year first quarter as
the business realized a surge in product orders in March 2020 related to third parties building stock in connection with the COVID-19
global pandemic.
·
Reported gross profit was $35.7 million, compared
to $25.9 million in the prior year first quarter, and gross profit margin of 33.7% in the first quarter of 2021, compared to 39.2% in
the prior year period. Results for the first quarter of 2021 included $10.1 million of gross profit from the Swerve and Wholesome acquisitions
and revenue gains, partially offset by $1.6 million of non-cash purchase accounting charges.
·
Adjusted Gross Profit Margin, when adjusting
for all non-cash and cash adjustments, was 36.9% percent down from 41.8% percent in the prior year driven by the inclusion of Wholesome‘s
lower-margin private label business, partially offset by productivity and favorable product mix within the business.
·
Consolidated operating loss was $3.1 million
compared to an operating loss of $33.2 million in the prior year and consolidated net loss was $12.0 million in the first quarter of 2021
compared to a net loss of $28.7 million in the prior year. The primary driver of the difference was a $40.6 million impairment charge
recorded in the first quarter of 2020 under previous ownership, partially offset by increased SG&A resulting from transaction costs
and increased costs of being a public company.
·
Consolidated Adjusted EBITDA increased 38.2%
to $17.5 million driven by contributions from the Swerve and Wholesome acquisitions, organic revenue growth and productivity, partially
offset by public company costs and increased bonus expense. Adjusted EBITDA as a percentage of sales for the quarter was approximately
17%.
SEGMENT RESULTS
Branded CPG Segment
Branded CPG segment product revenues increased
$41.6 million, or 103.4%, to $81.8 million for the first quarter of 2021, compared to $40.2 million for the same period in the prior year.
On a constant currency basis, product revenues increased 98.1% driven by the addition of Swerve and Wholesome revenue, which was not comparable
to the prior year period. Constant currency results reflect the strong growth in our natural brands. On a proforma basis, including the
impact of both acquisitions for the full quarter in both the current and prior year periods, organic constant-currency product revenue
grew 9.7%, compared to the prior year first quarter.
2
Operating income was $10.2 million in the first
quarter of 2021 compared to an operating loss of $6.8 million for the same period in the prior year. The increase of $16.9 million was
driven by an $11.1 million non-cash asset impairment charge in the prior year predecessor period, which did not exist in the first quarter
of 2021, contributions from the acquired Swerve and Wholesome businesses and revenue growth within the segment.
Flavors & Ingredients Segment
Flavors & Ingredients segment product revenues
decreased 6.7% to $24.0 million for the first quarter of 2021, compared to $25.8 million for the same period in the prior year. The decrease
was driven by a difficult comparison to the prior year quarter as the business realized a surge in product orders in March 2020 as customers
were building inventory in connection with the COVID-19 global pandemic.
Operating income in the segment was $1.0 million
in the first quarter of 2021, an increase of $25.0 million compared to an operating loss of $24.0 million in the prior year period. The
increase was driven by a $29.5 million non-cash asset impairment charge in the prior year predecessor period, partially offset by a $1.7
million restructuring charge associated with the upcoming closure of the Camden, NJ factory, a $1.0 million increase in amortization of
intangible assets resulting from the June 25, 2020 business combination and $0.7 million of non-cash purchase accounting charges related
to inventory revaluations.
CORPORATE
Beginning with the first quarter of 2021, our
corporate office functions are now reported and included under Corporate. Corporate is not a reportable or operating segment. Certain
prior year amounts have been reclassified to conform to the current presentation.
Operating loss for Corporate was $14.2 million
in the first quarter of 2021, compared to a $2.6 million loss in the prior year. The additional loss reflects $8.1 million of acquisition
expenses, $2.1 million of public company expenses, including both one-time and ongoing expenses, $0.8 million of stock-based compensation
expense and $0.5 million of increased bonus expense.
Cash
Flow & Balance Sheet
Net cash used in operating activities was $5.6
million and capital expenditures were $1.5 million for the first quarter of 2021.
As of March 31, 2021, the Company had cash and
cash equivalents of $27.8 million and $389.0 million of debt, net of unamortized debt issuance costs.
On February 5, 2021, the Company entered into
an amended and restated credit agreement, in part, to finance its acquisition of WSO Investments, Inc. the holding company for Wholesome.
The new agreement provides for a new $75 million five-year revolving credit facility, and a $375 million seven-year senior secured first-lien
term loan B. Reducing balance sheet leverage is a corporate priority and the Company expects to achieve a ratio of Net Debt to Adjusted
EBITDA of approximately 4.0x by December 31, 2021.
3
RECENT
STRATEGIC ACQUISITIONS
On February 5, 2021, the Company closed on its
acquisition of Wholesome, the #1 organic sweetener brand in North America.
The acquisition of Wholesome and its previous
purchase of Swerve, a rapidly growing manufacturer and marketer of a portfolio of zero sugar, keto-friendly, and plant-based sweeteners
and baking mixes, have doubled the Company’s North American market share in only eight months since the closing of its business
combination on June 25, 2020. These acquisitions significantly move the Company’s portfolio mix toward natural sweeteners, which
now represent approximately 87% of its North American Branded CPG business.
ACCOUNTING FOR WARRANTS
On April 12, 2021, the Acting Director of the
Division of Corporation Finance and Acting Chief Accountant of the Securities and Exchange Commission together issued a statement regarding
the accounting and reporting considerations for warrants issued by special purpose acquisition companies entitled “Staff Statement
on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies” (the “SEC Statement”).
As a result of the SEC Statement, the Company’s management reevaluated the accounting treatment of (i) the 15,000,000 redeemable
warrants that were included in the units issued by the Company in its initial public offering (the “Public Warrants”) and
(ii) the 5,263,500 redeemable warrants that were issued in a private placement (the “Private Warrants”, collectively with
the Public Warrants, the “Warrants”) in accordance with Accounting Standards Codification (“ASC”) 815-40, Derivatives
and Hedging: Contracts in an Entities Own Equity. ASC 815-40 states entities must consider whether to classify contracts that may be settled
in its own stock, such as warrants, as equity of the entity or as an asset or liability. The Company previously accounted for the Warrants
as components of equity.
After consideration of the guidance in the SEC
Statement, the Company concluded that the Private Warrants should be accounted for as a liability and measured at fair value with changes
in fair value each period reported in the Company’s statement of operations. The Company has completed its final analysis of this
change and has reflected the appropriate adjustments in its first quarter 2021 financial statements. The impact was not material to the
Company’s previously issued financial statements. The first quarter of 2021 reflects a non-cash loss of $2.4 million related to
the change in fair value of the Private Warrants, which is net of a $1.2 million non-cash gain related to the correction of an immaterial
error for the fiscal year ended December 31, 2020. The warrant liability included in the Company’s consolidated balance sheet as
of March 31, 2021 was $8.0 million.
Outlook
The Company is reiterating its outlook for full
year 2021, including the impact of its recent acquisitions of Swerve and Wholesome. The outlook includes expectations for growth on a
proforma organic basis and margins for the combined business. The Company defines proforma organic growth to be as if the Company owned
both Swerve and Wholesome for the full years 2020 and 2021. The Company’s 2021 outlook is as follows:
·
Net Product Revenues: $493 million to $505 million
(representing reported growth of greater than 78%, and proforma organic growth of 3% to 5%)
·
Adjusted EBITDA: $82 million to $85 million (representing
reported growth of greater than 50%, and proforma organic growth of 3% to 5%)
·
Adjusted Gross Profit Margin: 34% to 35% of product
revenues
4
·
Adjusted EBITDA Margin: Approximately 17% of
product revenues
·
Capital Expenditures: $10 million to $12 million
·
Tax Rate: Approximately 23%
Conference
Call Details
The Company will host a conference call and webcast
to review its first quarter results today, Friday, May 14, 2021 at 8:30am EDT. The conference call can be accessed live over the phone
by dialing (877) 705-6003 or for international callers by dialing (201) 493-6725. A replay of the call will be available through May 31,
2021 by dialing (844) 512-2921 or for international callers by dialing (412) 317-6671; the passcode is 13718232.
The live audio webcast of the conference call
will be accessible in the News & Events section on the Company's Investor Relations website at investor.wholeearthbrands.com.
An archived replay of the webcast will also be available shortly after the live event has concluded.
About Whole Earth Brands
Whole Earth Brands is a global food company enabling
healthier lifestyles and providing access to premium plant-based sweeteners, flavor enhancers and other foods through our diverse portfolio
of trusted brands and delicious products, including Whole Earth Sweetener®, Wholesome®, Swerve®,
Pure Via®, Equal® and Canderel®. With food playing a central role in people’s health
and wellness, Whole Earth Brands’ innovative product pipeline addresses the growing consumer demand for more dietary options, baking
ingredients and taste profiles. Our world-class global distribution network is the largest provider of plant-based sweeteners in more
than 100 countries with a vision to expand our portfolio to responsibly meet local preferences. We are committed to helping
people enjoy life’s everyday moments and the celebrations that bring us together. For more information on how we “Open a
World of Goodness®,” please visit www.WholeEarthBrands.com.
Forward-Looking
Statements
This press release contains forward-looking statements
(including within the meaning of the Private Securities Litigation Reform Act of 1995) concerning Whole Earth Brands, Inc. and other matters.
These statements may discuss goals, intentions and expectations as to future plans, trends, events, results of operations or financial
condition, or otherwise, based on current beliefs of management, as well as assumptions made by, and information currently available to,
management.
5
Forward-looking statements may be accompanied
by words such as “achieve,” “aim,” “anticipate,” “believe,” “can,” “continue,”
“could,” “drive,” “estimate,” “expect,” “forecast,” “future,”
“guidance,” “grow,” “improve,” “increase,” “intend,” “may,” “outlook,”
“plan,” “possible,” “potential,” “predict,” “project,” “should,”
“target,” “will,” “would,” or similar words, phrases or expressions. Examples of such forward-looking
statements include, but are not limited to, the statements of Messrs. Simon and Manzone, statements related to the Net Debt to Adjusted
EBITDA and the projected date, the statements in the “Outlook” section of this press release, and statements related to the
2021 guidance and long-term sales growth targets. Factors that could cause actual results to differ materially from those in the forward-looking
statements include, but are not limited to, the Company’s ability to integrate Wholesome and Swerve and achieve the anticipated
benefits of the transaction in a timely manner or at all; the extent of the impact of the COVID-19 pandemic, including the duration, spread,
severity, and any recurrence of the COVID-19 pandemic, the duration and scope of related government orders and restrictions, the impact
on our employees, and the extent of the impact of the COVID-19 pandemic on overall demand for the Company’s products; local, regional,
national, and international economic conditions that have deteriorated as a result of the COVID-19 pandemic, including the risks of a
global recession or a recession in one or more of the Company’s key markets, and the impact they may have on the Company and its
customers and management’s assessment of that impact; extensive and evolving government regulations that impact the way the Company
operates; and the impact of the COVID-19 pandemic on the Company’s suppliers, including disruptions and inefficiencies in the supply
chain.
These forward-looking statements are subject to
risks, uncertainties and other factors, many of which are outside of the Company’s control, which could cause actual results to
differ materially from the results contemplated by the forward-looking statements. These statements are subject to the risks and uncertainties
indicated from time to time in the documents the Company files (or furnishes) with the U.S. Securities and Exchange Commission.
You are cautioned not to place undue reliance
upon any forward-looking statements, which are based only on information currently available to the Company and speak only as of the date
made. The Company undertakes no commitment to publicly update or revise the forward-looking statements, whether written or oral that may
be made from time to time, whether as a result of new information, future events or otherwise, except as required by law.
Contacts:
Investor Relations Contact:
Whole Earth Brands
312-840-5001
investor@wholeearthbrands.com
ICR
Jeff Sonnek
646-277-1263
jeff.sonnek@icrinc.com
Media Relations Contact:
Wyecomm
Penny Kozakos
202-390-4409
Penny.Kozakos@wyecomm.com
6
Whole Earth Brands, Inc.
Condensed Consolidated Balance Sheets
(In thousands of dollars, except for share and per share data)
(Unaudited)
March 31, 2021
December 31, 2020
Assets
Current Assets
Cash and cash equivalents
$
27,806
$
16,898
Accounts receivable (net of allowances of $723 and $955, respectively)
72,205
56,423
Inventories
191,837
111,699
Prepaid expenses and other current assets
11,807
5,045
Total current assets
303,655
190,065
Property, Plant and Equipment, net
49,752
47,285
Other Assets
Operating lease right-of-use assets
18,749
12,193
Goodwill
236,895
153,537
Other intangible assets, net
283,845
184,527
Deferred tax assets, net
2,479
2,671
Other assets
6,926
6,260
Total Assets
$
902,301
$
596,538
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable
$
36,915
$
25,200
Accrued expenses and other current liabilities
34,616
29,029
Contingent consideration payable
52,672
—
Current portion of operating lease liabilities
5,074
3,623
Current portion of long-term debt
3,750
7,000
Total current liabilities
133,027
64,852
Non-Current Liabilities
Long-term debt
385,257
172,662
Warrant liabilities
7,999
—
Deferred tax liabilities, net
52,722
23,297
Operating lease liabilities, less current portion
16,281
11,324
Other liabilities
16,230
15,557
Total Liabilities
611,516
287,692
Commitments and Contingencies
—
—
Stockholders’ Equity
Preferred shares, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding at March 31, 2021 and December 31, 2020
—
—
Common stock, $0.0001 par value; 220,000,000 shares authorized; 38,426,669 shares issued and outstanding at March 31, 2021 and December 31, 2020
4
4
Additional paid-in capital
322,758
325,679
Accumulated deficit
(38,544
)
(25,442
)
Accumulated other comprehensive income
6,567
8,605
Total stockholders’ equity
290,785
308,846
Total Liabilities and Stockholders’ Equity
$
902,301
$
596,538
7
Whole Earth Brands, Inc.
Condensed Consolidated and Combined Statements of Operations
(In thousands of dollars, except for share and per share data)
(Unaudited)
(Successor)
(Predecessor)
Three Months Ended
March 31, 2021
Three Months Ended
March 31, 2020
Product revenues, net
$
105,825
$
65,972
Cost of goods sold
70,174
40,112
Gross profit
35,651
25,860
Selling, general and administrative expenses
32,907
16,048
Amortization of intangible assets
4,151
2,534
Asset impairment charges
—
40,600
Restructuring and other expenses
1,657
—
Operating loss
(3,064
)
(33,322
)
Change in fair value of warrant liabilities
(2,362
)
—
Interest expense, net
(5,078
)
(172
)
Loss on extinguishment and debt transaction costs
(5,513
)
—
Other income, net
310
1,721
Loss before income taxes
(15,707
)
(31,773
)
Benefit for income taxes
(3,682
)
(3,118
)
Net loss
$
(12,025
)
$
(28,655
)
Net loss per share – Basic and diluted
$
(0.31
)
8
Whole Earth Brands, Inc.
Condensed Consolidated and Combined Statements of Cash Flows
(In thousands of dollars)
(Unaudited)
(Successor)
(Predecessor)
Three Months Ended
March 31, 2021
Three Months Ended
March 31, 2020
Operating activities
Net loss
$
(12,025
)
$
(28,655
)
Adjustments to reconcile net loss to net cash provided by operating activities:
Stock-based compensation
1,639
—
Depreciation
969
679
Amortization of intangible assets
4,151
2,534
Deferred income taxes
3,402
(648
)
Asset impairment charges
—
40,600
Pension
(115
)
—
Amortization of inventory fair value adjustments
1,619
—
Non-cash loss on extinguishment of debt
4,435
—
Change in fair value of warrant liabilities
2,362
—
Changes in current assets and liabilities:
Accounts receivable
(1,341
)
312
Inventories
(4,903
)
3,959
Prepaid expenses and other current assets
665
(949
)
Accounts payable, accrued liabilities and income taxes
(7,052
)
(431
)
Other, net
597
(2,791
)
Net cash (used in) provided by operating activities
(5,597
)
14,610
Investing activities
Capital expenditures
(1,544
)
(894
)
Acquisitions, net of cash acquired
(186,601
)
—
Net cash used in investing activities
(188,145
)
(894
)
Financing activities
Proceeds from revolving credit facility
25,000
3,500
Repayments of revolving credit facility
(47,855
)
(5,000
)
Long-term borrowings
375,000
—
Repayments of long-term borrowings
(136,500
)
—
Debt issuance costs
(11,589
)
—
Funding to Parent, net
—
(12,430
)
Net cash provided by (used in) financing activities
204,056
(13,930
)
Effect of exchange rate changes on cash and cash equivalents
594
314
Net change in cash and cash equivalents
10,908
100
Cash and cash equivalents, beginning of period
16,898
10,395
Cash and cash equivalents, end of period
$
27,806
$
10,495
Supplemental disclosure of cash flow information
Interest paid
$
4,491
$
—
Taxes paid, net of refunds
$
3,535
$
1,070
9
Whole Earth Brands, Inc.
Reconciliation of GAAP and Non-GAAP Financial
Measures
(Unaudited)
The Company reports its financial results in accordance
with accounting principles generally accepted in the United States (“GAAP”). However, management believes that also presenting
certain non-GAAP financial measures provides additional information to facilitate the comparison of the Company’s historical operating
results and trends in its underlying operating results, and provides additional transparency on how the Company evaluates its business.
Management uses these non-GAAP financial measures in making financial, operating and planning decisions and in evaluating the Company’s
performance. The Company also believes that presenting these measures allows investors to view its performance using the same measures
that the Company uses in evaluating its financial and business performance and trends. The Company considers quantitative and qualitative
factors in assessing whether to adjust for the impact of items that may be significant or that could affect an understanding of its ongoing
financial and business performance and trends. The adjustments generally fall within the following categories: constant currency adjustments,
intangible asset non-cash impairments, purchase accounting charges, transaction related costs, long-term incentive expense, non-cash pension
expenses, severance and related expenses associated with a restructuring, public company readiness, M&A transaction expenses and other
one-time items affecting comparability of operating results. See below for a description of adjustments to the Company’s U.S. GAAP
financial measures included herein. Non-GAAP information should be considered as supplemental in nature and is not meant to be considered
in isolation or as a substitute for the related financial information prepared in accordance with U.S. GAAP. In addition, the Company’s
non-GAAP financial measures may not be the same as or comparable to similar non-GAAP measures presented by other companies.
DEFINITIONS OF THE COMPANY’S NON-GAAP
FINANCIAL MEASURES
The Company’s non-GAAP financial measures
and corresponding metrics reflect how the Company evaluates its operating results currently and provide improved comparability of operating
results. As new events or circumstances arise, these definitions could change. When these definitions change, the Company provides the
updated definitions and presents the related non-GAAP historical results on a comparable basis. When items no longer impact the Company’s
current or future presentation of non-GAAP operating results, the Company removes these items from its non-GAAP definitions.
The following is a list
of non-GAAP financial measures which the Company has discussed or expects to discuss in the future:
·
Constant Currency Presentation: We evaluate
our product revenue results on both a reported and a constant currency basis. The constant currency presentation, which is a non-GAAP
measure, excludes the impact of fluctuations in foreign currency exchange rates. We believe providing constant currency information provides
valuable supplemental information regarding our product revenue results, thereby facilitating period-to-period comparisons of our business
performance and is consistent with how management evaluates the Company's performance. We calculate constant currency percentages by converting
our current period local currency product revenue results using the prior period exchange rates and comparing these adjusted amounts to
our current period reported product revenues.
10
·
Adjusted EBITDA: We define Adjusted EBITDA
as net income or loss from our consolidated statements of operations before interest income and expense, income taxes, depreciation and
amortization, changes in fair value of warrant liabilities, other income and expense, losses on extinguishment and debt transaction costs
as well as certain other items that arise outside of the ordinary course of our continuing operations specifically described below:
o
Asset impairment charges: We exclude the impact of charges related to the impairment of goodwill
and other long-lived intangible assets. Impairment charges during the calendar year 2020 were incurred only during the predecessor period.
We believe that the exclusion of these impairments, which are non-cash, allows for more meaningful comparisons of operating results to
peer companies. We believe that this increases period-to-period comparability and is useful to evaluate the performance of the total company.
o
Purchase accounting adjustments: We exclude the impact of purchase accounting adjustments, including
the revaluation of inventory at the time of the business combination. These adjustments are non-cash and we believe that the adjustments
of these items more closely correlate with the sustainability of our operating performance.
o
Transaction-related expenses: We exclude transaction-related expenses including transaction bonuses
that were paid for by the seller of the businesses acquired by the Company on June 25, 2020. We believe that the adjustments of these
items more closely correlate with the sustainability of our operating performance.
o
Long-term incentive plan: We exclude the impact of costs relating to the long-term incentive plan.
We believe that the adjustments of these items more closely correlate with the sustainability of our operating performance.
o
Non-cash pension expenses: We exclude non-cash pension expenses/credits related to closed, defined
pension programs of the Company. We believe that the adjustments of these items more closely correlate with the sustainability of our
operating performance.
o
Severance and related expenses: We exclude employee severance and associated expenses related to
roles that have been eliminated or reduced in scope as a productivity measure taken by the Company. We believe that the adjustments of
these items more closely correlate with the sustainability of our operating performance.
o
Public company readiness: We exclude non-recurring organization and consulting costs incurred to
establish required public company capabilities. We believe that the adjustments of these items more closely correlate with the sustainability
of our operating performance.
o
Brand Introduction expenses: To measure operating performance, we exclude the Company’s sampling
program costs with Starbucks. We believe the exclusion of such amounts allows management and the users of the financial statements to
better understand our financial results.
o
Restructuring: To measure operating performance, we exclude restructuring costs. We believe that
the adjustments of these items more closely correlate with the sustainability of our operating performance.
o
M&A transaction expenses: We exclude expenses directly related to the acquisition of businesses
after the business combination on June 25, 2020. We believe that the adjustments of these items more closely correlate with the sustainability
of our operating performance.
o
Other items: To measure operating performance, we exclude certain expenses and include certain
gains that we believe are operational in nature. We believe the exclusion or inclusion of such amounts allows management and the users
of the financial statements to better understand our financial results.
Adjusted EBITDA is not
a presentation made in accordance with GAAP, and our use of the term Adjusted EBITDA may vary from the use of similarly-titled measures
by others in our industry due to the potential inconsistencies in the method of calculation and differences due to items subject to interpretation.
Adjusted EBITDA margin is Adjusted EBITDA for a particular period expressed as a percentage of product revenues for that period.
11
We use Adjusted EBITDA
to measure our performance from period to period both at the consolidated level as well as within our operating segments, to evaluate
and fund incentive compensation programs and to compare our results to those of our competitors. In addition to
Adjusted EBITDA being
a significant measure of performance for management purposes, we also believe that this presentation provides useful information to investors
regarding financial and business trends related to our results of operations and that when non-GAAP financial information is viewed with
GAAP financial information, investors are provided with a more meaningful understanding of our ongoing operating performance.
Adjusted EBITDA should
not be considered as an alternative to net income or loss, operating income, cash flows from operating activities or any other performance
measures derived in accordance with GAAP as measures of operating performance or cash flows as measures of liquidity. Adjusted EBITDA
has important limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results
as reported under GAAP.
The Company cannot reconcile its expected Adjusted
EBITDA to Net Income under “Outlook” without unreasonable effort because certain items that impact net income and other reconciling
metrics are out of the Company’s control and/or cannot be reasonably predicted at this time. These items include, but are not limited
to, share-based compensation expense, impairment of assets, acquisition-related charges and COVID-19 related expenses. These items are
uncertain, depend on various factors, and could have a material impact on GAAP reported results for the guidance period.
Adjusted Gross Profit Margin: We define
Adjusted Gross Profit Margin as Gross Profit excluding all cash and non-cash adjustments, impacting Cost of Goods Sold, included in the
Adjusted EBITDA reconciliation, as a percentage of Product Revenues, net. Such adjustments include: depreciation, purchase accounting
adjustments, long term incentives and other items adjusted by management to better understand our financial results.
The Company cannot reconcile its expected Adjusted
Gross Profit Margin to Gross Profit Margin under “Outlook” without unreasonable effort because certain items that impact Gross
Profit Margin and other reconciling metrics are out of the Company’s control and/or cannot be reasonably predicted at this time.
These items include, but are not limited to, share-based compensation expense, impairment of assets, acquisition-related charges and COVID-19
related expenses. These items are uncertain, depend on various factors, and could have a material impact on GAAP reported results for
the guidance period.
12
Whole Earth Brands, Inc.
Adjusted EBITDA reconciliation
(In thousands of dollars)
(Unaudited)
(Successor)
(Predecessor)
Three Months Ended
March 31, 2021
Three Months Ended
March 31, 2020
Product revenues, net
$
105,825
$
65,972
Net Loss
$
(12,025
)
$
(28,655
)
Benefit for income taxes
(3,682
)
(3,118
)
Other income, net
(310
)
(1,721
)
Loss on extinguishment and debt transaction costs
5,513
-
Interest expense, net
5,078
172
Change in fair value of warrant liabilities
2,362
-
Operating Loss
(3,064
)
(33,322
)
Depreciation
969
706
Amortization of intangible assets
4,151
2,534
Asset impairment charges
-
40,600
Purchase accounting adjustments
1,619
-
Transaction related expenses
210
-
Long term incentive plan
2,093
402
Non-cash pension expense
-
152
Severance and related expenses
-
188
Public company readiness
454
283
Brand introduction costs
-
753
Restructuring
1,657
-
M&A transaction expenses
8,472
-
Other items
890
335
Adjusted EBITDA
$
17,452
$
12,631
13
Whole Earth Brands, Inc.
Constant Currency Product Revenues, Net Reconciliation
(In thousands of dollars)
Three Months Ended March 31,
$ change
% change
Product revenues, net
2021
2020
Reported
Constant Dollar
Foreign
Exchange (2)
Reported
Constant Dollar
Foreign Exchange
Branded CPG
$
81,797
$
40,219
$
41,578
$
39,445
$
2,133
103.4
%
98.1
%
5.3
%
Flavors & Ingredients
$
24,028
$
25,753
$
(1,725
)
$
(1,725
)
$
-
-6.7
%
-6.7
%
0.0
%
Combined
$
105,825
$
65,972
$
39,853
$
37,720
$
2,133
60.4
%
57.2
%
3.2
%
Proforma Organic(1)
Branded CPG
$
102,177
$
91,183
$
10,994
$
8,832
$
2,162
12.1
%
9.7
%
2.4
%
Flavors & Ingredients
$
24,028
$
25,753
$
(1,725
)
$
(1,725
)
$
-
-6.7
%
-6.7
%
0.0
%
Combined
$
126,205
$
116,936
$
9,269
$
7,107
$
2,162
7.9
%
6.1
%
1.8
%
(1)
Product
revenues, net shown on a like for like basis, including the impact of both acquisitions for the full quarter in both the current and
prior year periods
(2)
The
"foreign exchange" amounts presented, reflect the estimated impact from fluctuations in foreign currerncy exchange rates on
product revenues.
14
Whole Earth Brands, Inc.
GAAP to Adjusted EBITDA Reconciliation
(In thousands of dollars)
Three Months Ended March 31, 2020
Three Months Ended March 31, 2021
GAAP
Non-cash adj.
Cash adj.
Adjusted EBITDA
GAAP
Non-cash adj.
Cash adj.
Adjusted EBITDA
$ Change
% Change
Product revenues, net
$
65,972
$
-
$
-
65,972
$
105,825
$
-
$
-
105,825
$
39,853
60.4
%
Cost of goods sold
40,112
(706
)
(1,027
)
38,379
70,174
(2,835
)
(556
)
66,783
28,404
74.0
%
Gross profit
25,860
706
1,027
27,593
35,651
2,835
556
39,042
11,449
41.5
%
Gross profit margin %
39.2
%
41.8
%
33.7
%
36.9
%
(4.9
%)
Selling, general and administrative expenses
16,048
(152
)
(934
)
14,962
32,907
(1,943
)
(9,374
)
21,590
6,628
44.3
%
Amortization of intangible assets
2,534
(2,534
)
-
-
4,151
(4,151
)
-
-
-
-
Asset impairment charges
40,600
(40,600
)
-
-
-
-
-
-
-
Restructuring and other non-recurring expenses
-
-
-
-
1,657
(358
)
(1,299
)
-
-
-
Operating income
$
(33,322
)
$
43,992
$
1,961
$
12,631
$
(3,064
)
$
9,287
$
11,229
$
17,452
$
4,821
38.2
%
Operating margin %
(50.5
%)
19.1
%
(2.9
%)
16.5
%
(2.7
%)
Note – Q1 2020 is a predecessor period and Q1 2021 is a successor
period.
15
Whole Earth Brands, Inc.
Adjustment to Operating Income by Income Statement
line and nature
(In thousands of dollars)
Three Months Ended March 31, 2020
Three Months Ended March 31, 2021
Non-Cash adjustments
Cost of Goods Sold
SG&A
Amort. Of Intangibles
Asset impair-
ment
Restruct-
uring
Operating Income
Cost of Goods Sold
SG&A
Amort. Of Intangibles
Asset impair-
ment
Restruct-
uring
Operating Income
Depreciation
706
-
-
-
-
706
969
-
-
-
-
969
Amortization of intangible assets
-
-
2,534
-
-
2,534
-
-
4,151
-
-
4,151
Asset impairment charges
-
-
-
40,600
-
40,600
-
-
-
-
-
-
Restructuring
-
-
-
-
-
-
-
-
-
358
358
Non-cash pension expense
-
152
-
-
-
152
-
-
-
-
-
-
Long term incentive plan
-
-
-
-
-
-
247
1,943
-
-
-
2,189
Purchase accounting costs
-
-
-
-
-
-
1,619
-
-
-
-
1,619
Total non-cash adjustments
706
152
2,534
40,600
-
43,992
2,835
1,943
4,151
-
358
9,287
Cash adjustments
Restructuring
-
-
-
-
-
-
-
-
-
-
1,299
1,299
Long term incentive plan
47
355
-
-
-
402
(22
)
(75
)
-
-
-
(97
)
Transaction related expenses
-
-
-
-
-
-
-
210
-
-
-
210
Severance and related expenses
188
-
-
-
188
-
-
-
-
-
-
Public company readiness
283
-
-
-
283
-
454
-
-
-
454
Brand introduction costs
753
-
-
-
-
753
-
-
-
-
-
-
M&A transaction expenses
-
-
-
-
-
-
-
8,472
-
-
-
8,472
Other items
227
108
-
-
-
335
578
313
-
-
-
890
Total cash adjustments
1,027
934
-
-
-
1,961
556
9,374
-
-
1,299
11,229
Total adjustments
1,733
1,086
2,534
40,600
-
45,953
3,391
11,317
4,151
-
1,657
20,516
Non-cash adjustments: The Adjusted EBITDA
reconciliation includes certain transactions that are non-cash in nature. Such items include depreciation, amortization of intangibles,
asset impairment charges, non-cash pension expense, long-term incentive plan expenses (stock based compensation) and purchase accounting
adjustments.
Cash adjustments: The Adjusted EBITDA reconciliation
includes certain transactions that are one-off, non-recurring in nature, but have been or will be settled with Company cash.