vitl-10q_20210328.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 28, 2021

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission File Number: 001-39411

 

 

Vital Farms, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

27-0496985

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

 

 

3601 South Congress Avenue

Suite C100

Austin, Texas

 

78704

(Address of principal executive offices)

(Zip Code)

(877) 455-3063

(Registrant’s telephone number, including area code)

 

 

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

 

VITL

 

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

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 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes No

As of May 6, 2021, the registrant had 39,965,152 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 

 


 

 

Table of Contents

 

Page

Special Note Regarding Forward-Looking Statements

i

Summary of Selected Risks Associated with Our Business

iii

 

 

 

PART I.

FINANCIAL INFORMATION

1

Item 1.

Financial Statements (Unaudited)

 

 

Condensed Consolidated Balance Sheets

1

 

Condensed Consolidated Statements of Operations

2

 

Condensed Consolidated Statements of Comprehensive Income

3

 

Condensed Consolidated Statements of Redeemable Noncontrolling Interest and Stockholders’ Equity

4

 

Condensed Consolidated Statements of Cash Flows

6

 

Notes to Unaudited Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

28

Item 4.

Controls and Procedures

29

PART II.

OTHER INFORMATION

30

Item 1.

Legal Proceedings

30

Item 1A.

Risk Factors

30

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

54

Item 3.

Defaults Upon Senior Securities

54

Item 4.

Mine Safety Disclosures

55

Item 5.

Other Information

55

Item 6.

Exhibits

55

 

Signatures

56

 

 

 

 

 

 

 


 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” (within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended) about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will” or “would” or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:

 

our expectations regarding our revenue, expenses and other operating results;

 

our ability to acquire new customers and successfully retain existing customers;

 

our ability to attract and retain our suppliers, distributors and co-manufacturers;

 

our ability to sustain or increase our profitability;

 

our ability to procure sufficient high quality eggs, butter, cream and other raw materials;

 

real or perceived quality with our products or other issues that adversely affect our brand and reputation;

 

changes in the tastes and preferences of our consumers;

 

the financial condition of, and our relationships with, our suppliers, co-manufacturers, distributors, retailers and foodservice customers, as well as the health of the foodservice industry generally;

 

real or perceived quality or health issues with our products or other issues that adversely affect our brand and reputation;

 

the ability of our suppliers and co-manufacturers to comply with food safety, environmental or other laws or regulations;

 

the effects of the ongoing COVID-19 pandemic, or of other global outbreaks of pandemics or contagious diseases or fear of such outbreaks, including on our supply chain, the demand for our products, and on overall economic conditions and consumer confidence and spending levels;

 

future investments in our business, our anticipated capital expenditures and our estimates regarding our capital requirements;

 

the costs and success of our marketing efforts, and our ability to promote our brand;

 

our reliance on key personnel and our ability to identify, recruit and retain skilled personnel;

 

our ability to effectively manage our growth;

 

our focus on a specific public benefit purpose and producing a positive effect for society may negatively influence our financial performance;

 

our ability to compete effectively with existing competitors and new market entrants;

 

the impact of adverse economic conditions;

 

the sufficiency of our cash to meet our liquidity needs;

 

seasonality; and

 

the growth rates of the markets in which we compete.

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. A summary of selected risks associated with our business are set forth below. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

i


 

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. And while we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.

ii


 

SUMMARY OF SELECTED RISKS ASSOCIATED WITH OUR BUSINESS

Our business is subject to numerous risks and uncertainties, including those discussed at length in the section titled “Risk Factors.” These risks include, among others, the following:

 

Our recent, rapid growth may not be indicative of our future growth, and if we continue to grow rapidly, we may not be able to effectively manage our growth or evaluate our future prospects. If we fail to effectively manage our future growth or evaluate our future prospects, our business could be adversely affected.

 

We have incurred net losses in the past and we may not be able to maintain or increase our profitability in the future.

 

Failure to introduce new products may adversely affect our ability to continue to grow.

 

We are dependent on the market for shell eggs.

 

Sales of pasture-raised shell eggs contribute the vast majority of our revenue, and a reduction in these sales would have an adverse effect on our financial condition.

 

Fluctuations in commodity prices and in the availability of feed grains could negatively impact our results of operations and financial condition.

 

If we fail to effectively expand our processing, manufacturing and production capacity as we continue to grow and scale our business, our business and operating results and our brand reputation could be harmed.

 

All of our pasture-raised shell eggs are processed at Egg Central Station in Springfield, Missouri. Any damage or disruption at this facility may harm our business.

 

We are currently expanding Egg Central Station, and we may not successfully complete construction of or commence operations in this expansion, or the expanded facility may not operate in accordance with our expectations.

 

If we fail to effectively maintain or expand our network of small family farms, our business, operating results and brand reputation could be harmed.

 

Our future business, results of operations and financial condition may be adversely affected by reduced or limited availability of pasture-raised eggs and milk and other raw materials that meet our standards.

 

We currently have a limited number of co-manufacturers. Loss of one or more of our co-manufacturers or our failure to timely identify and establish relationships with new co-manufacturers could harm our business and impede our growth.

 

We could be adversely affected by a change in consumer preferences, perception and spending habits in the natural food industry and on animal-based products, in particular, and failure to develop or enrich our product offering or gain market acceptance of our new products could have a negative effect on our business.

 

A limited number of distributors represent the substantial majority of our sales, and the loss of one or more distributor relationships that cannot be replaced in a timely manner may adversely affect our results of operations.

 

We are dependent on hatcheries and pullet farms to supply our network of family farms with laying hens. Any disruption in that supply chain could materially and adversely affect our business, financial condition or results of operations.

 

We source substantially all of our shell egg cartons from a sole source supplier and any disruptions may impact our ability to sell our eggs.

 

Because we rely on a limited number of third-party vendors to manufacture and store our products, we may not be able to maintain manufacturing and storage capacity at the times and with the capacities necessary to produce and store our products or meet the demand for our products.

 

Our brand and reputation may be diminished due to real or perceived quality or food safety issues with our products, which could have an adverse effect on our business, reputation, operating results and financial condition.

 

Demand for shell eggs is subject to seasonal fluctuations and can adversely impact our results of operations in certain quarters.

 

The continuing COVID-19 pandemic could have a material adverse impact on our business, results of operations and financial condition.

 

Food safety and food-borne illness incidents or advertising or product mislabeling may materially and adversely affect our business by exposing us to lawsuits, product recalls or regulatory enforcement actions, increasing our operating costs and reducing demand for our product offerings.

iii


 

 

Our operations are subject to FDA and USDA federal regulation, and there is no assurance that we will be in compliance with all regulations.

 

As a public benefit corporation, our duty to balance a variety of interests may result in actions that do not maximize stockholder value.

 

 

iv


 

 

PART I – FINANCIAL INFORMATION

 

VITAL FARMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share amounts)

 

 

 

March 28,

2021

 

 

December 27,

2020

 

 

 

(Unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

35,101

 

 

$

29,544

 

Investment securities

 

 

67,787

 

 

 

68,357

 

Accounts receivable, net

 

 

18,262

 

 

 

20,934

 

Inventories

 

 

11,280

 

 

 

12,902

 

Income taxes receivable

 

 

2,002

 

 

 

1,554

 

Prepaid expenses and other current assets

 

 

2,472

 

 

 

3,965

 

Total current assets

 

 

136,904

 

 

 

137,256

 

Property, plant and equipment, net

 

 

32,920

 

 

 

30,118

 

Goodwill

 

 

3,858

 

 

 

3,858

 

Deposits

 

 

142

 

 

 

142

 

Total assets

 

$

173,824

 

 

$

171,374

 

Liabilities, Redeemable Noncontrolling Interest and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

14,227

 

 

$

15,489

 

Accrued liabilities

 

 

8,731

 

 

 

9,845

 

Lease obligation, current

 

 

476

 

 

 

471

 

Contingent consideration, current

 

 

87

 

 

 

109

 

Total current liabilities

 

 

23,521

 

 

 

25,914

 

Lease obligation, net of current portion

 

 

206

 

 

 

327

 

Contingent consideration, non-current

 

 

4

 

 

 

18

 

Deferred tax liabilities, net

 

 

2,680

 

 

 

2,537

 

Other liability, non-current

 

 

191

 

 

 

192

 

Total liabilities

 

 

26,602

 

 

 

28,988

 

Commitments and contingencies (Note 15)

 

 

 

 

 

 

 

 

Redeemable noncontrolling interest

 

 

175

 

 

 

175

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock, $0.0001 par value per share, 310,000,000 shares authorized as of March 28, 2021 (unaudited) and December 27, 2020; 39,744,306 and 39,444,040 shares issued and outstanding as of March 28, 2021 (unaudited) and December 27, 2020, respectively

 

 

5

 

 

 

5

 

Treasury stock, at cost, 5,494,918 common shares as of March 28, 2021

   (unaudited) and December 27, 2020

 

 

(16,276

)

 

 

(16,276

)

Additional paid-in capital

 

 

145,689

 

 

 

144,311

 

Retained earnings

 

 

17,530

 

 

 

14,039

 

Accumulated other comprehensive loss

 

 

(53

)

 

 

(31

)

Total stockholders’ equity attributable to Vital Farms, Inc. stockholders

 

 

146,895

 

 

 

142,048

 

Noncontrolling interests

 

 

152

 

 

 

163

 

Total stockholders’ equity

 

$

147,047

 

 

$

142,211

 

Total liabilities, redeemable noncontrolling interest, and stockholders’ equity

 

$

173,824

 

 

$

171,374

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

1


 

VITAL FARMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except share and per share data)

(Unaudited)

 

 

 

13-Weeks Ended

 

 

 

March 28,

2021

 

 

March 29,

2020

 

Net revenue

 

$

58,545

 

 

$

47,579

 

Cost of goods sold

 

 

37,215

 

 

 

31,724

 

Gross profit

 

 

21,330

 

 

 

15,855

 

Operating expenses:

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

13,183

 

 

 

9,678

 

Shipping and distribution

 

 

5,063

 

 

 

3,274

 

Total operating expenses

 

 

18,246

 

 

 

12,952

 

Income from operations

 

 

3,084

 

 

 

2,903

 

Other income (expense), net:

 

 

 

 

 

 

 

 

Interest expense

 

 

(18

)

 

 

(158

)

Other income, net

 

 

110

 

 

 

20

 

Total other income (expense), net

 

 

92

 

 

 

(138

)

Net income before income taxes

 

 

3,176

 

 

 

2,765

 

(Benefit) provision for income taxes

 

 

(304

)

 

 

831

 

Net income

 

 

3,480

 

 

 

1,934

 

Less: Net loss attributable to

   noncontrolling interests

 

 

(11

)

 

 

(11

)

Net income attributable to Vital Farms, Inc. common

   stockholders

 

$

3,491

 

 

$

1,945

 

Net income per share attributable to Vital Farms, Inc.

   stockholders:

 

 

 

 

 

 

 

 

Basic:

 

$

0.09

 

 

$

0.07

 

Diluted:

 

$

0.08

 

 

$

0.05

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

Basic:

 

 

39,536,928

 

 

 

25,942,277

 

Diluted:

 

 

43,509,371

 

 

 

37,118,484

 

 

See accompanying notes to the unaudited condensed consolidated financial statements

 

 

 

 

 

 

2


 

 

VITAL FARMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

(Unaudited)

 

 

 

13-Weeks Ended

 

 

 

March 28,

2021

 

 

March 29,

2020

 

Net income

 

$

3,480

 

 

$

1,934

 

Other comprehensive loss

 

 

 

 

 

 

 

 

    Unrealized holding loss on available-for-sale securities, net of tax

 

 

(22

)

 

 

 

Total comprehensive income

 

$

3,458

 

 

$

1,934

 

 

See accompanying notes to the unaudited condensed consolidated financial statements

 

 

 

 

 

3


 

 

VITAL FARMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE NONCONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY

(Amounts in thousands, except share amounts)

(Unaudited)

 

 

Redeemable

Noncontrolling

Interest

 

 

Common

Stock

 

 

Treasury

Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

Stockholders’

Equity

Attributable

 

 

 

 

 

 

 

 

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Additional

Paid-In

Capital

 

 

Retained

Earnings

 

 

Accumulated Other Comprehensive Loss

 

 

to Vital

Farms, Inc.

Stockholders’

 

 

Noncontrolling

Interests

 

 

Total

Stockholders’

Equity

 

Balances as of December 27, 2020

$

175

 

 

 

44,938,958

 

 

$

5

 

 

 

(5,494,918

)

 

$

(16,276

)

 

$

144,311

 

 

$

14,039

 

 

$

(31

)

 

$

142,048

 

 

$

163

 

 

$

142,211

 

Exercise of stock options

 

 

 

 

300,266

 

 

 

 

 

 

 

 

 

 

 

 

525

 

 

 

 

 

 

 

 

 

525

 

 

 

 

 

 

525

 

Stock-based compensation

   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

853

 

 

 

 

 

 

 

 

 

853

 

 

 

 

 

 

853

 

Net loss attributable to non-

   controlling interests -

   stockholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11

)

 

 

(11

)

Other comprehensive loss, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(22

)

 

 

(22

)

 

 

 

 

 

(22

)

Net income attributable to

   Vital Farms, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,491

 

 

 

 

 

 

3,491

 

 

 

 

 

 

3,491

 

Balances as of March 28, 2021

 

175

 

 

 

45,239,224

 

 

$

5

 

 

 

(5,494,918

)

 

$

(16,276

)

 

 

145,689

 

 

$

17,530

 

 

$

(53

)

 

$

146,895

 

 

$

152

 

 

$

147,047

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

4


 

VITAL FARMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK, REDEEMABLE NONCONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY

(Amounts in thousands, except share amounts)

(Unaudited)

 

 

 

Redeemable

Convertible

Preferred Stock

 

 

Redeemable

Noncontrolling

Interest

 

 

Common

Stock

 

 

Treasury

Stock

 

 

 

 

 

 

 

 

 

 

Total

Stockholders’

Equity

Attributable

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Additional

Paid-In

Capital

 

 

Retained

Earnings

 

 

to Vital

Farms, Inc.

Stockholders’

 

 

Noncontrolling

Interests

 

 

Total

Stockholders’

Equity

 

Balances as of December 29, 2019

 

 

8,192,876

 

 

$

23,036

 

 

$

175

 

 

 

31,429,898

 

 

$

3

 

 

 

(5,494,918

)

 

$

(16,276

)

 

$

19,593

 

 

$

5,239

 

 

$

8,559

 

 

$

79

 

 

$

8,638

 

Exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

7,558

 

 

 

 

 

 

 

 

 

 

 

 

10

 

 

 

 

 

 

10

 

 

 

 

 

$

10

 

Stock-based compensation

   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

448

 

 

 

 

 

 

448

 

 

 

 

 

 

448

 

Net loss attributable to non-

   controlling interests -

   stockholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11

)

 

 

(11

)

Net income attributable to Vital

   Farms, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,945

 

 

 

1,945

 

 

 

 

 

 

1,945

 

Balances as of March 29, 2020

 

 

8,192,876

 

 

$

23,036

 

 

$

175

 

 

 

31,437,456

 

 

$

3

 

 

 

(5,494,918

)

 

$

(16,276

)

 

$

20,051

 

 

$

7,184

 

 

$

10,962

 

 

$

68

 

 

$

11,030

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

5


 

 

VITAL FARMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

 

 

 

13-Weeks Ended

 

 

 

March 28,

2021

 

 

March 29,

2020

 

Cash flows provided by operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

3,480

 

 

$

1,934

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

785

 

 

 

456

 

Bad debt recovery

 

 

(45

)

 

 

(116

)

Stock-based compensation expense

 

 

853

 

 

 

448

 

Deferred taxes

 

 

142

 

 

 

413

 

Other

 

 

(58

)

 

 

75

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

2,717

 

 

 

(2,953

)

Inventories

 

 

1,636

 

 

 

726

 

Income taxes (receivable) payable

 

 

(449

)

 

 

413

 

Prepaid expenses and other current assets

 

 

1,492

 

 

 

619

 

Deposits and other assets

 

 

 

 

 

(27

)

Accounts payable

 

 

(1,402

)

 

 

1,434

 

Accrued liabilities and other liabilities

 

 

(1,111

)

 

 

(2,575

)

Net cash provided by operating activities

 

$

8,040

 

 

$

847

 

Cash flows used in investing activities:

 

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(3,451

)

 

 

(4,269

)

Purchases of available-for-sale debt securities

 

 

(14,409

)

 

 

 

Sales, maturities, and call redemptions of available-for-sale debt securities

 

 

15,010

 

 

 

 

     Net cash used in investing activities

 

$

(2,850

)

 

$

(4,269

)

Cash flows provided by financing activities:

 

 

 

 

 

 

 

 

Proceeds from borrowings under term loan

 

 

 

 

 

3,907

 

Proceeds from borrowings under equipment loan

 

 

 

 

 

1,461

 

Repayment of equipment loan

 

 

 

 

 

(49

)

Repayment of term loan

 

 

 

 

 

(168

)

Payment of contingent consideration

 

 

(42

)

 

 

(47

)

Payment of deferred offering costs

 

 

 

 

 

(1,145

)

Principal payments under finance lease obligation

 

 

(116

)

 

 

(110

)

Proceeds from exercise of stock options

 

 

525

 

 

 

10

 

Net cash provided by financing activities

 

$

367

 

 

$

3,859

 

Net increase in cash and cash equivalents

 

$

5,557

 

 

$

437

 

Cash and cash equivalents at beginning of the period

 

 

29,544

 

 

 

1,274

 

Cash and cash equivalents at end of the period

 

$

35,101

 

 

$

1,711

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

20

 

 

$

136

 

Cash paid for income taxes

 

$

 

 

$

5

 

Supplemental disclosure of non-cash investing and financing

   activities:

 

 

 

 

 

 

 

 

Purchases of property, plant and equipment included in accounts payable and accrued liabilities

 

$

140

 

 

$

 

Deferred offering costs in accounts payable and accrued liabilities

 

$

 

 

$

444

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

6


 

VITAL FARMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share amounts)

(Unaudited)

1. Nature of the Business and Basis of Presentation

Vital Farms, Inc. (“Vital Farms”) was incorporated in Delaware on June 6, 2013 and is headquartered in Austin, Texas. Vital Farms packages, markets and distributes pasture-raised shell eggs, pasture-raised butter and other products. These products are sold under the trade names Vital Farms, Alfresco Farms, Lucky Ladies and RedHill Farms, primarily to retail and foodservice channels in the United States.

Vital Farms Missouri, LLC, Backyard Eggs, LLC, Barn Door Farms, LLC and Sagebrush Foodservice, LLC are all wholly owned subsidiaries of Vital Farms (collectively referred to with Vital Farms as the “Company”). All significant intercompany transactions and balances have been eliminated in the Vital Farms unaudited condensed consolidated financial statements.

The accompanying unaudited condensed consolidated financial statements as of March 28, 2021 and for the 13-week periods ended March 28, 2021 and March 29, 2020 have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. The accompanying unaudited condensed consolidated financial statements include the accounts of Vital Farms, its subsidiaries and a variable interest entity (“VIE”) in which Vital Farms has a variable interest and is the primary beneficiary. The noncontrolling interest attributable to the VIE is presented as a component separate from stockholders’ equity in the unaudited condensed consolidated balance sheets. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements on our Annual Report on Form 10-K and the notes thereto for the fiscal year ended December 27, 2020.

The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements. In the opinion of management, the included disclosures are adequate and the accompanying unaudited condensed consolidated financial statements contain all adjustments which are necessary for a fair presentation of the Company’s consolidated financial position as of March 28, 2021, consolidated results of operations for the 13-week periods ended March 28, 2021 and March 29, 2020, and consolidated cash flows for the 13-week periods ended March 28, 2021 and March 29, 2020. Such adjustments are of a normal and recurring nature. The condensed consolidated results of operations for the 13-week period ended March 28, 2021 are not necessarily indicative of the consolidated results of operations that may be expected for the fiscal year ending December 26, 2021.

Fiscal Year: The Company’s fiscal year ends on the last Sunday in December and contains either 52 or 53 weeks. In a 52-week fiscal year, each of the Company’s fiscal quarters consist of 13 weeks. The additional week in a 53-week fiscal year is added to the fourth quarter, making such quarter consist of 14 weeks. Therefore, the financial results of certain 53-week fiscal years, and the associated 14-week quarters, will not be exactly comparable to the prior and subsequent 52-week fiscal years and the associated 13-week quarters. The quarters ended March 28, 2021 and March 29, 2020 both contain operating results for 13 weeks.

Impact of COVID-19 Pandemic: Due to the ongoing COVID-19 pandemic, the Company has implemented business continuity plans designed to address and mitigate the impact of the COVID-19 pandemic on the Company’s business. The Company does not currently anticipate that the COVID-19 pandemic will have a material impact on the timelines for the Company’s product development and expansion efforts. However, the extent to which the COVID-19 pandemic impacts the Company’s business, product development and expansion efforts, corporate development objectives and the value of and market for the Company’s common stock will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, travel restrictions, quarantines, social distancing and business closure requirements in the United States, and the effectiveness of actions taken globally to contain and treat the disease. The global economic slowdown, the overall disruption of global supply chains and distribution systems and the other risks and uncertainties associated with the pandemic could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects.

 

Forward Stock Split: In July 2020, the board of directors and the stockholders of the Company approved a 2.46-for-1 forward stock split of the Company’s outstanding common stock and preferred stock, which was effected on July 22, 2020. Stockholders entitled to fractional shares as a result of the forward stock split will receive a cash payment in lieu of receiving fractional shares. All common stock, preferred stock, and per share information has been retroactively adjusted to give effect to this forward stock split for all periods presented. Shares of common stock underlying outstanding stock options and other equity instruments were proportionately increased and the respective per share value and exercise prices, if applicable, were proportionately decreased in accordance with the terms of the agreements governing such securities. There were no changes in the par values of the Company’s common stock and preferred stock as a result of the forward stock split.

7


 

 

Initial Public Offering: In August 2020, the Company completed its initial public offering (“IPO”) of 10,699,573 shares of common stock at an offering price of $22.00 per share.  The Company offered 5,040,323 shares of common stock and the selling stockholders identified in the Prospectus offered an additional 5,659,250 shares of common stock, including the underwriter’s option to purchase up to an additional 1,395,596 shares of common stock from the selling stockholders. The Company received gross proceeds of approximately $110,887 before deducting underwriting discounts, commissions and offering related transaction costs; the Company did not receive any proceeds from the sale of shares by the selling stockholders.  Upon the closing of the IPO in August 2020, all of the then-outstanding shares of preferred stock automatically converted into 8,192,876 shares of common stock on a one-for-one basis. Subsequent to the closing of the IPO, there were no shares of preferred stock outstanding. The condensed consolidated financial statements as of March 28, 2021, including share and per share amounts, include the effects of the IPO.

2. Summary of Significant Accounting Policies

The significant accounting policies and estimates used in preparation of the unaudited condensed consolidated financial statements are described in the Company’s audited consolidated financial statements as of and for the fiscal year ended December 27, 2020, and the notes thereto, which are included in our Annual Report on Form 10-K. There have been no material changes to the Company’s significant accounting policies during the 13-week period ended March 28, 2021.  

Recently Adopted Accounting Pronouncements: The new accounting pronouncements recently adopted by the Company are described in the Company’s audited consolidated financial statements as of and for the fiscal year ended December 27, 2020, and the notes thereto, which are included in our Annual Report on Form 10-K. Except as described below, there have been no new accounting pronouncements adopted by the Company during the13-week period ended March 28, 2021.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued. The amendments are effective for all entities as of March 12, 2020 through December 31, 2022. The Company adopted ASU 2020-04 on March 12, 2020 and the adoption of this standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted: In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”) and also issued subsequent amendments to the initial guidance, ASU 2017-13, ASU 2018-01, ASU 2018-10, ASU 2018-11, ASU 2018-20, ASU 2019-01, ASU 2019-10, ASU 2020-02, and ASU 2020-05 (collectively, “Topic 842”). The guidance in Topic 842 supersedes the leasing guidance in Topic 840, Leases. Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for all leases with terms longer than twelve months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the unaudited condensed consolidated statement of operations. An entity may adopt the guidance either (1) retrospectively to each prior reporting period presented in the financial statements with a cumulative-effect adjustment recognized at the beginning of the earliest comparative period presented or (2) retrospectively at the beginning of the period of adoption through a cumulative-effect adjustment. The Company expects to adopt Topic 842 retrospectively at the beginning of the period of adoption, December 27, 2021, through a cumulative-effect adjustment, and will not apply the new standard to comparative periods presented. The new standard provides a number of practical expedients. Upon adoption, the Company expects to elect all of the practical expedients available. The Company is currently evaluating the impact of its pending adoption of Topic 842 on its consolidated financial statements. It is anticipated that the primary impact of the adoption of Topic 842 will be the recording of a right-of-use asset and lease liability of similar amount on the Company’s condensed consolidated balance sheet.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”) and also issued subsequent amendments to the initial guidance, ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-10, ASU 2019-11, ASU 2020-02, and ASU 2020-03 (collectively, “Topic 326”), to introduce a new impairment model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. Topic 326 requires financial assets measured at amortized cost to be presented at the net amount expected to be collected. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances. For non-public companies, Topic 326 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company expects to adopt Topic 326 on December 26, 2022. The Company is currently evaluating the impact of its pending adoption of Topic 326 on its consolidated financial statements.

8


 

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which intends to simplify the guidance by removing certain exceptions to the general principles and clarifying or amending existing guidance. ASU 2019-12 is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company expects to adopt ASU 2019-12 on December 26, 2022. Although the Company is currently evaluating the impact of the adoption of ASU 2019-12, the Company does not expect it to have a material impact on its consolidated financial statements.

3. Investment Securities

The following table summarizes the Company’s available-for-sale investment securities as of March 28, 2021, which were purchased in October 2020:

 

 

 

Amortized Cost

 

 

Unrealized Losses

 

 

Fair Value

 

   U.S. Corporate Bonds and U.S. Dollar

        Denominated Foreign Bonds

 

$

62,155

 

 

$

(69

)

 

$

62,086

 

   Commercial Paper

 

 

4,699

 

 

 

 

 

 

4,699

 

   U.S. Treasury

 

 

1,003

 

 

 

(1

)

 

 

1,002

 

Total

 

$

67,857

 

 

$

(70

)

 

$

67,787

 

The following table summarizes the Company’s available-for-sale investment securities as of December 27, 2020:

 

 

 

Amortized Cost

 

 

Unrealized Losses

 

 

Fair Value

 

   U.S. Corporate Bonds and U.S. Dollar

        Denominated Foreign Bonds

 

$

58,671

 

 

$

(41

)

 

$

58,630

 

   Commercial Paper

 

 

6,697

 

 

 

 

 

 

6,697

 

   U.S. Treasury

 

 

3,030

 

 

 

 

 

 

3,030

 

Total

 

$

68,398

 

 

$

(41

)

 

$

68,357

 

In October 2020, the Company purchased available-for-sale debt securities of approximately $68,336. During the 13-weeks ended March 28, 2021 there were purchases of $14,386, sales and maturities of $12,542 with realized losses of $1, and call redemptions of $2,468 with realized losses of $8.

The securities incurred unrealized losses of $29 and related tax benefit of $7 for the 13-weeks ended March 28, 2021.

Actual maturities may differ from contractual maturities because some borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Contractual maturities of investment securities as of March 28, 2021 are as follows:

 

 

 

Amortized Cost

 

 

Fair Value

 

Due within one year

 

$

34,292

 

 

$

34,278

 

Due in 1-5 years

 

 

33,565

 

 

 

33,509

 

Total available-for-sale

 

$

67,857

 

 

$

67,787

 

 

The following tables present information about the Company’s financial assets measured at fair value on a recurring basis for the periods presented:

 

 

Fair Value Measurements as of March 28, 2021, Using:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   U.S. Corporate Bonds and U.S. Denominated Foreign Bonds

 

$

 

 

$

62,086

 

 

$

 

 

$

62,086

 

   Commercial Paper

 

 

 

 

 

4,699

 

 

 

 

 

 

4,699

 

   Money Market

 

 

26,094

 

 

 

 

 

 

 

 

 

26,094

 

   U.S. Treasury

 

 

 

 

 

1,002

 

 

 

 

 

 

1,002

 

Total assets measured at fair value

 

$

26,094

 

 

$

67,787

 

 

$

 

 

$

93,881

 

 

9


 

 

 

 

Fair Value Measurements as of December 27, 2020, Using:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   U.S. Corporate Bonds and U.S. Denominated Foreign Bonds

 

$

 

 

$

58,630

 

 

$

 

 

$

58,630

 

   Commercial Paper

 

 

 

 

 

6,697

 

 

 

 

 

 

6,697

 

   Money Market

 

 

25,469

 

 

 

 

 

 

 

 

 

25,469

 

   U.S. Treasury

 

 

 

 

 

3,030

 

 

 

 

 

 

3,030

 

Total assets measured at fair value

 

$

25,469

 

 

$

68,357

 

 

$

 

 

$

93,826

 

 

4. Revenue Recognition

The following table summarizes the Company’s net revenue by primary product for the periods presented:

 

 

 

13-Weeks Ended

 

 

 

March 28,

2021

 

 

March 29,

2020

 

Net Revenue:

 

 

 

 

 

 

 

 

Egg and egg-related products

 

$

54,428

 

 

$

43,945

 

Butter and butter-related products

 

 

4,117