10-Q
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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 September 25, 2022

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 October 31, 2022, the registrant had 40,731,879 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 


Table of Contents

 

Page

Special Note Regarding Forward-Looking Statements

ii

 

 

 

 

 

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 (Loss)

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

20

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

33

Item 4.

Controls and Procedures

33

PART II.

OTHER INFORMATION

34

Item 1.

Legal Proceedings

34

Item 1A.

Risk Factors

34

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

63

Item 3.

Defaults Upon Senior Securities

63

Item 4.

Mine Safety Disclosures

63

Item 5.

Other Information

63

Item 6.

Exhibits

64

 

Signatures

65

 

 

 

 

i


 

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 farmers, 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 farmers suppliers, co-manufacturers, distributors, retailers and foodservice customers, as well as the health of the foodservice industry generally;
the ability of our farmers suppliers and co-manufacturers to comply with food safety, environmental or other laws or regulations;
the effects of a public health pandemic or contagious disease, such as COVID-19, or fear of such outbreaks, on our supply chain, the demand for our products, and on overall economic conditions and consumer confidence and spending levels;
the impact of the recently completed expansion of our Egg Central Station facility on our revenue;
future investments in our business, our anticipated capital expenditures and our estimates regarding our capital requirements;
anticipated changes in our product offerings and our ability to innovate to offer successful new products;
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 personnel;
our ability to effectively manage our growth;
the potential influence of our focus on a specific public benefit purpose and producing a positive effect for society;
our environmental, sustainability and governance goals, opportunities and initiatives, as well as the standards and expectations of third parties regarding these matters;
our ability to compete effectively with existing competitors and new market entrants;
the impact of adverse economic conditions, including as a result of the war between Ukraine and Russia, increased interest rates and inflation;
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 is set forth at the

ii


 

beginning of the section titled “Risk Factors.” 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.

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.

iii


 

PART I – FINANCIAL INFORMATION

 

VITAL FARMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share amounts)

 

 

 

September 25,
2022

 

 

December 26,
2021

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

18,838

 

 

$

30,966

 

Investment securities, available-for-sale

 

 

68,076

 

 

 

68,621

 

Accounts receivable, net

 

 

33,128

 

 

 

26,938

 

Inventories

 

 

25,471

 

 

 

10,945

 

Prepaid expenses and other current assets

 

 

5,572

 

 

 

3,817

 

Total current assets

 

 

151,085

 

 

 

141,287

 

Property, plant and equipment, net

 

 

48,230

 

 

 

44,608

 

Operating lease right-of-use assets

 

 

2,238

 

 

 

 

Goodwill

 

 

3,858

 

 

 

3,858

 

Other assets

 

 

1,183

 

 

 

189

 

Total assets

 

$

206,594

 

 

$

189,942

 

Liabilities, Redeemable Noncontrolling Interest and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

25,566

 

 

$

22,520

 

Accrued liabilities

 

 

23,686

 

 

 

15,143

 

Operating lease liabilities

 

 

1,444

 

 

 

 

Finance lease liabilities

 

 

5

 

 

 

327

 

Income taxes payable

 

 

112

 

 

 

 

Total current liabilities

 

 

50,813

 

 

 

37,990

 

Operating lease liabilities, non-current

 

 

1,011

 

 

 

 

Other liabilities

 

 

209

 

 

 

192

 

Total liabilities

 

$

52,033

 

 

$

38,182

 

Commitments and contingencies (Note 15)

 

 

 

 

 

 

Redeemable noncontrolling interest

 

 

 

 

 

175

 

Stockholders’ equity:

 

 

 

 

 

 

Common stock, $0.0001 par value per share, 310,000,000 shares authorized as of September 25, 2022 and December 26, 2021; 40,731,879 and 40,493,969 shares issued and outstanding as of September 25, 2022 and December 26, 2021, respectively

 

 

4

 

 

 

5

 

Additional paid-in capital

 

 

154,066

 

 

 

149,000

 

Retained earnings

 

 

2,294

 

 

 

2,746

 

Accumulated other comprehensive loss

 

 

(1,803

)

 

 

(281

)

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

 

 

154,561

 

 

 

151,470

 

Noncontrolling interests

 

 

 

 

 

115

 

Total stockholders’ equity

 

$

154,561

 

 

$

151,585

 

Total liabilities, redeemable noncontrolling interest, and stockholders’ equity

 

$

206,594

 

 

$

189,942

 

 

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

 

 

39-Weeks Ended

 

 

 

September 25,
2022

 

 

September 26,
2021

 

 

September 25,
2022

 

 

September 26,
2021

 

Net revenue

 

$

92,040

 

 

$

64,627

 

 

$

251,969

 

 

$

183,496

 

Cost of goods sold

 

 

62,549

 

 

 

44,788

 

 

 

175,838

 

 

 

120,394

 

Gross profit

 

 

29,491

 

 

 

19,839

 

 

 

76,131

 

 

 

63,102

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

20,561

 

 

 

15,326

 

 

 

55,193

 

 

 

42,053

 

Shipping and distribution

 

 

6,906

 

 

 

6,318

 

 

 

22,279

 

 

 

16,755

 

Total operating expenses

 

 

27,467

 

 

 

21,644

 

 

 

77,472

 

 

 

58,808

 

Income (loss) from operations

 

 

2,024

 

 

 

(1,805

)

 

 

(1,341

)

 

 

4,294

 

Other income (expense), net:

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(12

)

 

 

(11

)

 

 

(27

)

 

 

(42

)

Other income (expense), net

 

 

164

 

 

 

3

 

 

 

501

 

 

 

300

 

Total other income (expense), net

 

 

152

 

 

 

(8

)

 

 

474

 

 

 

258

 

Net income (loss) before income taxes

 

 

2,176

 

 

 

(1,813

)

 

 

(867

)

 

 

4,552

 

Income tax provision (benefit)

 

 

1,465

 

 

 

(486

)

 

 

(232

)

 

 

(1,485

)

Net income (loss)

 

 

711

 

 

 

(1,327

)

 

 

(635

)

 

 

6,037

 

Less: Net loss attributable to
   noncontrolling interests

 

 

(12

)

 

 

(6

)

 

 

(21

)

 

 

(41

)

Net income (loss) attributable to Vital Farms, Inc.
   common stockholders

 

$

723

 

 

$

(1,321

)

 

$

(614

)

 

$

6,078

 

Net income (loss) per share attributable to Vital
   Farms, Inc. stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

Basic:

 

$

0.02

 

 

$

(0.03

)

 

$

(0.02

)

 

$

0.15

 

Diluted:

 

$

0.02

 

 

$

(0.03

)

 

$

(0.02

)

 

$

0.14

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

40,695,014

 

 

 

40,196,410

 

 

 

40,618,736

 

 

 

39,910,063

 

Diluted:

 

 

42,879,818

 

 

 

40,196,410

 

 

 

40,618,736

 

 

 

43,380,711

 

 

See accompanying notes to the unaudited condensed consolidated financial statements

2


 

VITAL FARMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Amounts in thousands)

(Unaudited)

 

 

 

13-Weeks Ended

 

 

39-Weeks Ended

 

 

 

September 25,
2022

 

 

September 26,
2021

 

 

September 25,
2022

 

 

September 26,
2021

 

Net income (loss)

 

$

711

 

 

$

(1,327

)

 

$

(635

)

 

$

6,037

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding loss on available-for-sale securities, net of deferred tax
   benefit of $
110 and $5 for the 13-week periods ended September 25, 2022
   and September 26, 2021, respectively and $
471 and $19 for the
   39-week periods ended September 25, 2022 and September 26, 2021, respectively

 

 

(356

)

 

 

(21

)

 

 

(1,522

)

 

 

(69

)

Total comprehensive income (loss)

 

$

355

 

 

$

(1,348

)

 

$

(2,157

)

 

$

5,968

 

 

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

 

 

 

 

 

 

 

 

 

 

 

Total
Stockholders’
Equity
Attributable

 

 

 

 

 

 

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Additional
Paid-In
Capital

 

 

Retained
Earnings (Deficit)

 

 

Accumulated
Other
Comprehensive
Loss

 

 

to Vital
Farms, Inc.
Stockholders

 

 

Noncontrolling
Interests

 

 

Total
Stockholders’
Equity

 

Balances as of December 26, 2021

$

175

 

 

 

40,493,969

 

 

$

5

 

 

$

149,000

 

 

$

2,746

 

 

$

(281

)

 

$

151,470

 

 

$

115

 

 

$

151,585

 

Exercise of stock options

 

 

 

 

102,328

 

 

 

 

 

 

254

 

 

 

 

 

 

 

 

 

254

 

 

 

 

 

 

254

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

1,296

 

 

 

 

 

 

 

 

 

1,296

 

 

 

 

 

 

1,296

 

Net loss attributable to non-
   controlling interests - stockholders

 

 

 

 

 

 

 

 

 

 

 

 

 

162

 

 

 

 

 

 

162

 

 

 

(164

)

 

 

(2

)

Other comprehensive loss, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(783

)

 

 

(783

)

 

 

 

 

 

(783

)

Net loss attributable to
   Vital Farms, Inc. stockholders

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,536

)

 

 

 

 

 

(1,536

)

 

 

 

 

 

(1,536

)

Balances as of March 27, 2022

$

175

 

 

 

40,596,297

 

 

$

5

 

 

$

150,550

 

 

$

1,372

 

 

$

(1,064

)

 

$

150,863

 

 

$

(49

)

 

$

150,814

 

Exercise of stock options

 

 

 

 

35,573

 

 

 

 

 

 

143

 

 

 

 

 

 

 

 

 

143

 

 

 

 

 

 

143

 

Vesting of restricted stock units

 

 

 

 

47,544

 

 

 

 

 

 

(9

)

 

 

 

 

 

 

 

 

(9

)

 

 

 

 

 

(9

)

Stock-based compensation
   expense

 

 

 

 

 

 

 

 

 

 

1,633

 

 

 

 

 

 

 

 

 

1,633

 

 

 

 

 

 

1,633

 

Net loss attributable to non-
   controlling interests -
   stockholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7

)

 

 

(7

)

Other comprehensive loss, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(383

)

 

 

(383

)

 

 

 

 

 

(383

)

Net income attributable to
   Vital Farms, Inc. stockholders

 

 

 

 

 

 

 

 

 

 

 

 

 

199

 

 

 

 

 

 

199

 

 

 

 

 

 

199

 

Balances as of June 26, 2022

$

175

 

 

 

40,679,414

 

 

$

5

 

 

$

152,317

 

 

$

1,571

 

 

$

(1,447

)

 

$

152,446

 

 

$

(56

)

 

$

152,390

 

Exercise of stock options

 

 

 

 

49,941

 

 

 

 

 

 

171

 

 

 

 

 

 

 

 

 

171

 

 

 

 

 

 

171

 

Vesting of restricted stock units

 

 

 

 

2,524

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation
   expense

 

 

 

 

 

 

 

 

 

 

1,578

 

 

 

 

 

 

 

 

 

1,578

 

 

 

 

 

 

1,578

 

Dissolution of equity investment

 

(175

)

 

 

 

 

 

(1

)