8-K
Real Good Food Company, Inc. false 0001871149 0001871149 2022-11-10 2022-11-10

 

 

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): November 10, 2022

 

 

THE REAL GOOD FOOD COMPANY, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-41025   87-1280343

(State or other jurisdiction of

incorporation or organization)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification Number)

3 Executive Campus, Suite 155

Cherry Hill, NJ 08002

(Address of Principal Executive Offices; Zip Code)

(856) 644-5624

(Registrant’s telephone number, including area code)

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

Class A common stock $0.0001 par value per share   RGF   Nasdaq Global Market

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  

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 7(a)(2)(B) of the Securities Act.  

 

 

 


ITEM 2.02

RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On November 10, 2022, The Real Good Food Company, Inc. (the “Company”) issued a press release announcing its financial results for the quarter ending September 30, 2022. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

The information contained in this report, including the exhibit attached hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of, or otherwise regarded as filed under, the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be deemed incorporated by reference into any filing by the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing

 

ITEM 9.01

FINANCIAL STATEMENTS AND EXHIBITS.

(d) Exhibits.

 

Exhibit
Number

  

Description

99.1    Press Release, dated November 10, 2022.
104    Cover Page Interactive Data File (embedded within the inline XRBL document).


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    THE REAL GOOD FOOD COMPANY, INC.
Date: November 10, 2022     By:  

/s/ Gerard G. Law

      Gerard G. Law
      Chief Executive Officer
EX-99.1

Exhibit 99.1

 

LOGO

The Real Good Food Company Reports Third Quarter 2022 Financial Results and Provides Preliminary 2023 Outlook

CHERRY HILL, N.J., November 10, 2022 The Real Good Food Company, Inc. (Nasdaq: RGF) (“Real Good Foods” or the “Company”), an innovative, high-growth, branded, health- and wellness-focused frozen food company, today reported financial results for its third quarter ended September 30, 2022.

Management Commentary

Bryan Freeman, Executive Chairman, said: “The categories we compete in continue to grow and have historically performed even better in recessionary periods. Our brand health indicators remain strong, highlighted by continued growth in our brand’s industry leading household penetration rate, which increased to 8.5% this October. The new products we introduced this year (multi-serve Asian Entrees, Breaded Poultry and Breakfast Bowls) continue to gain solid traction as evidenced by strong velocity and the 39K distribution points we have secured and will be rolled out over the coming months. Each of these products help to modernize frozen foods with new options that are low in carbohydrates and sugar, high in protein, and made from gluten and grain free real ingredients. These delicious products are a result of our mission to make our favorite foods more nutritious and help our customers achieve a healthier lifestyle. With 1 in 12 US households buying our products, we know we are having a positive impact. I believe we will see this continue to grow in the future and that is why we see at least 30% growth to $200M in revenue for 2023.”

Gerard Law, Chief Executive Officer, added: “Our Bolingbrook facility continued to ramp production in the third quarter towards its expected $250-300 million capacity and is now in the final and most-efficient start-up phase. Gross margins in the third quarter were below our expectations owing in part to what I would characterize as startup blues at our Bolingbrook facility. We have largely worked through these start-up related issues and I am happy to report that in recent weeks production has significantly increased and efficiencies are nearing targeted levels. As we continue to improve plant efficiencies, implement automation and benefit from lower commodity costs, we expect gross margins to improve significantly in the fourth quarter and in 2023. In summary, we are well positioned to produce profitable growth and are committing to generating positive operating cash flow in 2023.” concluded Law.

Third Quarter 2022 Highlights

 

   

Net sales in the third quarter increased 63.2% year-over-year to $37.6 million

 

   

Household penetration increased to 8.6% in October 2022 compared to 6.1% in October 2021

 

   

Secured commitments for 15K new distribution points for our new products bringing YTD total to 39K

 

   

New Bolingbrook facility start-up almost complete – currently in final and most efficient phase

Financial Results for the Quarter Ended September 30, 2022

Net sales grew 63.2% to $37.6 million in the third quarter of 2022, as compared to $23.0 million in the third quarter of 2021. The increase was primarily due to strong growth in sales volumes in the Company’s core product lines, driven by greater demand from existing retail and club customers, and to a lesser extent, new customers.

 

1


Gross profit decreased by $0.6 million to $1.8 million, or 4.7% of net sales, in the third quarter of 2022, as compared to $2.4 million, or 10.2% of net sales, in the third quarter of 2021. The decrease in gross profit was primarily driven by higher raw material costs, as well as an increase in plant manufacturing costs related to the start-up of the Company’s new manufacturing facility in Bolingbrook, IL – partially offset by a more favorable product mix weighted towards self-manufactured products, which carry higher margins. The Company believes the higher raw material costs have begun to normalize and will start to benefit margins beyond the third quarter of 2022.

Adjusted gross profit, a non-GAAP term, increased by $2.0 million to $5.9 million, reflecting an adjusted gross margin of 15.8% of net sales, in the third quarter of 2022, as compared to $3.9 million, or an adjusted gross margin of 17.1% of net sales, in the third quarter of 2021. The increase in adjusted gross profit was primarily due to the increase in net sales, including in the amount of products sold that were self-manufactured, as well as higher net price realization, partially offset by increases in manufacturing and raw materials costs.

Total operating expenses increased by $4.5 million to $12.4 million in the third quarter of 2022, as compared to $7.9 million in the third quarter of 2021. The increase in operating expenses was primarily driven by increased personnel expenses related to the build-out of the Company’s operations, finance and leadership teams and increases in research and development.

Adjusted EBITDA, a non-GAAP term, totaled a loss of $3.8 million in the third quarter of 2022, as compared to a loss of $2.7 million in the third quarter of 2021. The decrease in adjusted EBITDA was driven by lower gross profit, prior to the normalization in manufacturing costs observed subsequent to the end of the third quarter.

Loss from operations increased by $5.1 million to $10.6 million in the third quarter of 2022, as compared to $5.6 million in the third quarter of 2021. The increase in loss from operations was primarily due to the aforementioned increase in operating expenses.

Net loss increased by $1.3 million to $13.1 million in the third quarter of 2022, as compared to $11.8 million in the third quarter of 2021. The increase in net loss was attributable to the decrease in gross margin and increases in operating expenses described above.

Balance Sheet Highlights

As of September 30, 2022, the Company had cash and cash equivalents of $5.4 million (which includes $2.3 million of restricted cash) and total debt was $61.4 million. The Company believes that its cash balance and cash flow from operations – together with borrowing capacity under its credit facilities and the lowering of inventory on-hand to more normalized levels – is sufficient to fund the business for the foreseeable future.

Outlook

The Company is maintaining its guidance for the year ending December 31, 2022:

 

   

Net sales to be at the lower end of the guided range of approximately $155 million to $160 million, reflecting an increase of 84% to 90% as compared to 2021

 

   

Adjusted gross margin in the range of 19% to 21%

 

   

Adjusted EBITDA loss to be at the lower end of the guided range of approximately $7.0 million to $9.0 million

 

2


The Company is also providing preliminary guidance for the year ending December 31, 2023:

 

   

Net sales of at least $200 million

 

   

Adjusted gross margin of at least 24%

 

   

Adjusted EBITDA in the mid-to-high single-digit millions range

Long-term, the Company continues to expect:

 

   

Net sales of approximately $500 million

 

   

Adjusted gross margin of 35%

 

   

Adjusted EBITDA margin of 15%

The Company is not providing guidance for gross margin or net loss, the most directly comparable GAAP measures, and similarly cannot provide a reconciliation between its forecasted adjusted gross margin and GAAP gross margin and adjusted EBITDA and net loss without unreasonable effort due to the unavailability of reliable estimates for certain items. These items are not within the Company’s control, may vary significantly between periods and could significantly impact future financial results.

Conference Call and Webcast Details

Management will host an investor conference call at 8:30 a.m. Eastern time on Friday, November 11, 2022 to discuss Real Good Foods’ third quarter financial results, provide a corporate update, and conclude with a question and answer session with telephone participants. To participate, please use the following information:

Q3 2022 Conference Call and Webcast

Date: Friday, November 11, 2022

Time: 8:30 a.m. Eastern time

U.S./Canada Dial-in: 1-877-451-6152

International Dial-in: 1-201-389-0879

Conference ID: 13734162

Webcast: RGF Q3 FY22 Webcast

Please dial in at least 10 minutes before the start of the call to ensure timely participation.

A telephone playback of the call will be available through Friday, November 25, 2022. To listen, call 1-844-512-2921 within the United States and Canada or 1-412-317-6671 when calling internationally. Please use the replay pin number 13734162. A webcast will also be available by clicking here: RGF Q3 FY22 Webcast.

About The Real Good Food Company

Real Good Foods (NASDAQ: RGF) is a leading health and wellness frozen foods company, providing a better way to enjoy your favorite foods. The Company’s mission is to provide “Real Food You Feel Good About Eating”, making delicious, nutritious foods that are low in sugar, low in carbohydrates and high in protein. The Real Good Foods family of products includes breakfast, lunch, dinner, and snacks – available in over 16,000 stores nationwide with additional direct-to-consumer options.

 

3


To learn more, please visit our website at realgoodfoods.com or join us on social media @realgoodfoods – where we maintain some of the largest followings in the frozen food industry today.

Non-GAAP Financial Measures

In addition to the Company’s financial results determined in accordance with generally accepted accounting principles in the United States (“GAAP”), the Company believes that adjusted gross profit, adjusted gross margin, and adjusted EBITDA, each of which is a non-GAAP financial measure, are useful performance measures and metrics for investors to evaluate current trends in its operations and compare the ongoing financial and operating performance of our business from period to period. In addition, management uses these non-GAAP financial measures to assess our operating performance and for internal planning purposes. The Company also believes these measures are widely used by investors, securities analysts, and other parties in evaluating companies in our industry as measures of financial and operational performance. However, the non-GAAP financial measures included in this press release have limitations and should not be considered in isolation, as substitutes for, or as superior to, performance measures calculated in accordance with GAAP. Other companies may calculate these measures differently, or may not calculate them at all, which limits the usefulness of these measures as comparative measures. Because of these limitations, the Company considers, and you should consider, these non-GAAP financial measures with other operating and financial performance measures presented in accordance with GAAP. To the extent the Company utilizes such non-GAAP financial measures in the future, it expects to calculate them using a consistent method from period to period.

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, which statements are subject to considerable risks and uncertainties. Forward-looking statements include all statements other than statements of historical fact contained in this press release, including statements regarding its projected financial results, including net sales, adjusted gross margin, and adjusted EBITDA and its ability to increase production at its new facility, improve profitability and meet its long-term growth objectives. The Company has attempted to identify forward-looking statements by using words such as “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “should,” “will,” or “would,” and similar expressions or the negative of these expressions.

Forward-looking statements represent management’s current expectations and predictions about trends affecting the Company’s business and industry and are based on information available as of the time such statements are made. Although the Company does not make forward-looking statements unless it believes it has a reasonable basis for doing so, it cannot guarantee their accuracy or completeness. Forward-looking statements involve numerous known and unknown risks, uncertainties and other factors that may cause its actual results, performance or achievements to be materially different from any future results, performance or achievements predicted, assumed or implied by the forward-looking statements. Some of the risks and uncertainties that may cause its actual results to materially differ from those expressed or implied by these forward-looking statements are described in the section entitled “Risk Factors” in its Annual Report on Form 10-K for the year ended December 31, 2021.

 

4


In addition, readers are cautioned that the Company may make future changes to its business and operations in response to the impacts of the COVID-19 pandemic, supply chain disruptions and macroeconomic challenges, or in response to other business developments, which changes may be inconsistent with the Company’s prior forward-looking statements, and which may not be disclosed in future public announcements.

Investor Relations Contact

Chris Bevenour

(856) 955-1453

ir@realgoodfoods.com

 

5


UNAUDITED CONSOLIDATED BALANCE SHEET

(In thousands, except share data)

 

     AS OF  
     September 30,     December 31,  
     2022     2021  

ASSETS

    

Current assets:

    

Cash

   $ 3,040     $ 27,435  

Accounts receivable, net

     17,510       8,968  

Inventories

     35,118       16,622  

Other current assets

     5,307       9,927  
  

 

 

   

 

 

 

Total current assets

     60,975       62,952  

Property and equipment, net

     35,213       10,289  

Operating lease right-of-use assets

     11,232       12,127  

Deferred loan cost

     1,053       818  

Goodwill

     12,486       12,486  

Restricted Cash

     2,313       2,310  

Other noncurrent assets

     187       1,162  
  

 

 

   

 

 

 

Total assets

   $ 123,459     $ 102,144  
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

Current liabilities:

    

Accounts payable

   $ 19,239     $ 15,205  

Operating lease liabilities

     1,407       1,040  

Finance lease liabilities

     2,127       198  

Business acquisition liabilities, current portion

     920       8,111  

Accrued and other current liabilities

     1,475       6,763  

Current portion of long-term debt

     359       328  
  

 

 

   

 

 

 

Total current liabilities

     25,528       31,645  
  

 

 

   

 

 

 

Revolving line of credit/capex line

     47,515       17,501  

Lease line of credit

     10,213       7,258  

Long-term operating lease liabilities

     10,408       11,249  

Long-term finance lease liabilities

     14,598       154  

Term Loan

     10,000       —    

Long-term Business acquisition liabilities

     2,654       3,352  

Other long term liabilities

     138       —    
  

 

 

   

 

 

 

Total Liabilities

     121,054       71,159  

Commitments and contingencies (Note 12)

    

Stockholders’ Equity:

    

Class A common stock, $0.0001 par value—100,000,000 shares authorized; 6,199,885 and 6,169,885 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

     1       1  

Class B common stock, $0.0001 par value—25,000,000 shares authorized; 19,552,681 and 19,577,681 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

     2       2  

Additional paid-in capital

     54,911       49,693  

Accumulated deficit

     (18,246     (10,143
  

 

 

   

 

 

 

Total stockholders’ equity attributable to The Real Good Food Company, Inc.

     36,668       39,553  

Non-controlling interest

     (34,263     (8,568
  

 

 

   

 

 

 

Total stockholders’ equity

     2,405       30,985  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 123,459     $ 102,144  
  

 

 

   

 

 

 

 

6


UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share/unit and per share/unit data)

 

     THREE MONTHS ENDED     NINE MONTHS ENDED  
     SEPTEMBER 30,     SEPTEMBER 30,  
     2022     2021     2022     2021  

Net sales

   $ 37,550     $ 23,014     $ 105,935     $ 58,477  

Cost of sales

     35,782       20,659       97,569       49,447  
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     1,768       2,355       8,366       9,030  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Selling and distribution

     4,615       4,323       14,851       10,291  

Marketing

     1,659       1,732       4,617       3,119  

Administrative

     6,142       1,875       18,009       7,677  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     12,416       7,930       37,477       21,087  
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

     (10,648     (5,575     (29,111     (12,057

Interest expense

     2,469       839       4,650       4,322  

Other expense

     —         (309     —         (309

Change in fair value of convertible debt

     —         5,730       —         6,100  
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income taxes

     (13,117     (11,835     (33,761     (22,170

Income tax expense

     —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Loss

   $ (13,117   $ (11,835   $ (33,761   $ (22,170

Less: net loss attributable to non-controlling interest

     (9,969     —         (25,659  

Preferred return on Series A preferred units

     —         146       —         438  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to The Real Good Food Company, Inc.

   $ (3,148   $ (11,981   $ (8,102   $ (22,608
  

 

 

   

 

 

   

 

 

   

 

 

 

NON-GAAP FINANCIAL MEASURES – RECONCILIATION

 

     THREE MONTHS ENDED     NINE MONTHS ENDED  
     SEPTEMBER 30,     SEPTEMBER 30,  
     2022     2021     2022     2021  

Gross Profit

   $ 1,768     $ 2,355     $ 8,366     $ 9,030  

Start-up and idle capacity costs (1)

     3,932       904       8,804       2,398  

Costs related to the COVID-19 pandemic (2)

     249       682       2,021       1,175  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Gross Profit

   $ 5,949     $ 3,941     $ 19,191     $ 12,603  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Gross Margin

     15.8     17.1     18.1     21.6
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

Represents start-up costs associated with commencing operations at our City of Industry and Bolingbrook facilities and other costs associated with temporary manufacturing capacity at our City of Industry and Bolingbrook facilities, including indirect labor costs, utility costs, and rent.

(2)

Represents direct costs incurred in connection with the COVID-19 pandemic, including freight rush charges, labor costs, tolling upcharges, and storage.

 

7


     THREE MONTHS ENDED     NINE MONTHS ENDED  
     SEPTEMBER 30,     SEPTEMBER 30,  
     2022     2021     2022     2021  

Net Loss

   $ (13,117   $ (11,835   $ (33,761   $ (22,170

Depreciation and amortization

     971       344       1,775       791  

Provision for income tax

     —         —         —         —    

Interest expense

     2,469       839       4,650       4,322  

Other Income

     —         5,730       —         6,100  

Start-up and idle capacity costs (1)

     3,932       904       8,804       2,398  

Costs related to the COVID-19 pandemic (2)

     249       682       2,021       1,175  

Share-based compensation (3)

     1,735       0       5,168       36  

Transaction expenses (4)

     —         652       —         3,353  

Other (5)

     —         —         25       —    

Bolingbrook start-up administrative costs (6)

     —         —         1,017       —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ (3,761   $ (2,684   $ (10,301   $ (3,995
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA Margin

     (10.0 )%      (11.7 )%      (9.7 )%      (6.8 )% 
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

Represents start-up costs associated with commencing operations at our City of Industry and Bolingbrook facilities and other costs associated with temporary manufacturing capacity at our City of Industry and Bolingbrook facilities, including indirect labor costs, utility costs, and rent.

(2)

Represents direct costs incurred in connection with the COVID-19 pandemic, including freight rush charges, labor costs, tolling upcharges, and storage.

(3)

Represents equity-based compensation expense.

(4)

Represents costs incurred in connection with pursuing certain strategic and financing transactions, including legal, consulting, and accounting costs.

(5)

Represents other non-recurring administrative costs incurred during the period.

(6)

Represents administrative costs incurred in connection with start-up of the new Bolingbrook Facility.

RECONCILIATION OF CERTAIN REPORTED ITEMS TO CERTAIN NON-GAAP ADJUSTED ITEMS

 

NINE MONTHS ENDED SEPTEMBER 30, 2022  
     Net Sales      Gross
Profit
     Gross
Margin
    Selling
Expenses
    Marketing
Expenses
    Administrative
Expenses
    Income
from
Operations
    Operating
Margin
 

Reported

   $ 105,935      $ 8,366        7.9   $ 14,851     $ 4,617     $ 18,009     $ (29,111     (27.5 )% 

Items Affecting Comparability:

                  

Start-up and idle capacity costs (1)

     —          8,804          —         —         —         8,804    

Costs related to the COVID-19 pandemic (2)

     —          2,021          —         —         —         2,021    

Share-based compensation (3)

     —          —            (190     (1     (4,976     5,168    

Transaction expenses (4)

     —          —            —         —         —         —      

Other (5)

     —          —            —         —         (25     25    

Bolingbrook start-up administrative costs (6)

     —          —            —         —         (1,017     1,017    
  

 

 

    

 

 

      

 

 

   

 

 

   

 

 

   

 

 

   

Adjusted

   $ 105,935      $ 19,191        18.1   $ 14,661     $ 4,616     $ 11,991     $ (12,076     (11.4 )% 
  

 

 

    

 

 

      

 

 

   

 

 

   

 

 

   

 

 

   

 

8


NINE MONTHS ENDED SEPTEMBER 30, 2021  
     Net Sales      Gross
Profit
     Gross
Margin
    Selling
Expenses
    Marketing
Expenses
     Administrative
Expenses
    Income
from
Operations
    Operating
Margin
 

Reported

   $ 58,477      $ 9,030        15.4   $ 10,291     $ 3,119      $ 7,677     $ (12,057     (20.6 )% 

Items Affecting Comparability:

                   

Start-up and idle capacity costs (1)

     —          2,398          —         —          —         2,398    

Costs related to the COVID-19 pandemic (2)

     —          1,175          —         —          —         1,175    

Share-based compensation (3)

     —          —            —         —          (36     36    

Transaction expenses (4)

     —          —            —         —          (3,353     3,353    

Other (5)

     —          —            —         —          —         —      

Bolingbrook start-up administrative costs (6)

     —          —            —         —          —         —      
  

 

 

    

 

 

      

 

 

   

 

 

    

 

 

   

 

 

   

Adjusted

   $ 58,477      $ 12,603        21.6   $ 10,291     $ 3,119      $ 4,288     $ (5,095     (8.7 )% 
  

 

 

    

 

 

      

 

 

   

 

 

    

 

 

   

 

 

   
THREE MONTHS ENDED SEPTEMBER 30, 2022  
     Net Sales      Gross
Profit
     Gross
Margin
    Selling
Expenses
    Marketing
Expenses
     Administrative
Expenses
    Income
from
Operations
    Operating
Margin
 

Reported

   $ 37,550      $ 1,768        4.7   $ 4,615     $ 1,659      $ 6,142     $ (10,648     (28.4 )% 

Items Affecting Comparability:

                   

Start-up and idle capacity costs (1)

     —          3,932          —         —          —         3,932    

Costs related to the COVID-19 pandemic (2)

     —          249          —         —          —         249    

Share-based compensation (3)

     —          —            (65     —          (1,670     1,735    

Transaction expenses (4)

     —          —            —         —          —         —      

Other (5)

     —          —            —         —          —         —      

Bolingbrook start-up administrative costs (6)

     —          —            —         —          —         —      
  

 

 

    

 

 

      

 

 

   

 

 

    

 

 

   

 

 

   

Adjusted

   $ 37,550      $ 5,949        15.8   $ 4,550     $ 1,659      $ 4,472     $ (4,732     (12.6 )% 
  

 

 

    

 

 

      

 

 

   

 

 

    

 

 

   

 

 

   

 

9


THREE MONTHS ENDED SEPTEMBER 30, 2021  
     Net Sales      Gross
Profit
     Gross
Margin
    Selling
Expenses
     Marketing
Expenses
     Administrative
Expenses
    Income from
Operations
    Operating
Margin
 

Reported

   $ 23,014      $ 2,355        10.2   $ 4,323      $ 1,732      $ 1,875     $ (5,575     (24.2 )% 

Items Affecting Comparability:

                    

Start-up and idle capacity costs (1)

     —          904          —          —          —         904    

Costs related to the COVID-19 pandemic (2)

     —          682          —          —          —         682    

Share-based compensation (3)

     —          —            —          —          —         —      

Transaction expenses (4)

     —          —            —          —          (652     652    

Other (5)

     —          —            —          —          —         —      

Bolingbrook start-up administrative costs (6)

     —          —            —          —          —         —      
  

 

 

    

 

 

      

 

 

    

 

 

    

 

 

   

 

 

   

Adjusted

   $ 23,014      $ 3,941        17.1   $ 4,323      $ 1,732      $ 1,223     $ (3,337     (14.5 )% 
  

 

 

    

 

 

      

 

 

    

 

 

    

 

 

   

 

 

   

 

(1)

Represents start-up costs associated with commencing operations at our City of Industry Facility and other costs associated with temporary manufacturing capacity at our City of Industry Facility, including indirect labor costs, utility costs, and rent.

(2)

Represents direct costs incurred in connection with the COVID-19 pandemic, including freight rush charges, labor costs, tolling upcharges, and storage.

(3)

Represents equity-based compensation expense.

(4)

Represents costs incurred in connection with pursuing certain strategic and financing transactions, including legal, consulting, and accounting costs.

(5)

Represents other non-recurring administrative costs incurred during the period.

(6)

Represents administrative costs incurred in connection with start-up of the new Bolingbrook Facility.

 

10