Notes to Unaudited Condensed Consolidated Financial Statements
Note 1. Introduction
The Company
Beyond Meat, Inc., a Delaware corporation (including its subsidiaries unless the context otherwise requires, the “Company”), is one of the fastest growing food companies in the United States, offering a portfolio of revolutionary plant-based meats. The Company builds meat directly from plants, an innovation that enables consumers to experience the taste, texture and other sensory attributes of popular animal-based meat products while enjoying the nutritional and environmental benefits of eating the Company’s plant-based meat products. The Company’s brand commitment, “Eat What You Love,” represents a strong belief that there is a better way to feed our future and that the positive choices we all make, no matter how small, can have a great impact on our personal health and the health of our planet. By shifting from animal-based meat to plant-based meat, we can positively impact four growing global issues: human health, climate change, constraints on natural resources and animal welfare.
On January 14, 2020, the Company registered its subsidiary, Beyond Meat EU B.V., in the Netherlands. On April 28, 2020, the Company registered its subsidiary, Beyond Meat (Jiaxing) Food Co., Ltd. (“BYND JX”), in the Zhejiang Province in China. On June 17, 2021, the Company incorporated its subsidiary, Beyond Meat Canada Inc. in Canada.
The Company’s primary production facilities are located in Columbia, Missouri, and Devault, Pennsylvania, and research and development and administrative offices are located in El Segundo, California. In addition to its own production facilities, the Company uses co-manufacturers in various locations in the United States, Canada and the Netherlands. In the second quarter of 2020, the Company acquired its first manufacturing facility in Europe located in Enschede, the Netherlands. This facility completed operational testing of dry blend production in late 2020. In the second quarter of 2021, this facility completed commercial trial runs for dry blend production and began commercial trial runs for the Company’s extruded product which is expected to be completed by the end of the third quarter of 2021. In addition, in June 2020 the Company announced the official opening of a new co-manufacturing facility to be used for Beyond Meat production built by the Company’s distributor in the Netherlands. In the third quarter of 2020, the Company and BYND JX entered into an investment agreement and related factory leasing contract to design and develop manufacturing facilities in the Jiaxing Economic & Technological Development Zone to manufacture plant-based meat products under the Beyond Meat brand in China. Renovations in the leased facility were substantially completed and trial production began in the first quarter of 2021. In the second quarter of 2021, several commercial trials of certain of the Company’s manufacturing processes were completed. Full-scale end-to-end production is expected by the end of 2021.
The Company sells to a variety of customers in the retail and foodservice channels throughout the United States and internationally primarily through distributors who purchase, store, sell, and deliver the Company’s products. In addition, the Company sells directly to customers in the retail and foodservice channels who handle their own distribution. In the third quarter of 2020, the Company launched an e-commerce site to sell its products direct to consumers in the United States.
As of July 3, 2021, approximately 93.0% of the Company’s assets were located in the United States.
COVID-19 Pandemic
On March 11, 2020, the World Health Organization declared COVID-19 a pandemic. The global spread and unprecedented impact of COVID-19 continues to create significant volatility, uncertainty and economic disruption. The Company’s operations and its financial results including net revenues, gross profit, gross margin and operating expenses were negatively impacted by COVID-19 in 2020 and the first half of 2021. The extent of COVID-19’s effect on the Company’s operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
(including any resurgences), the rising impact of COVID-19 variants, the wide distribution and public acceptance of COVID-19 vaccines, and the level of social and economic restrictions imposed in the United States and abroad in an effort to curb the spread of the virus, all of which are uncertain and difficult to predict considering the rapidly evolving landscape. As a result, it is not currently possible to ascertain the overall impact of COVID-19 on the Company’s business, results of operations, financial condition or liquidity. While the ultimate health and economic impact of COVID-19 continues to be highly uncertain, the Company acknowledges that its business operations and results of operations, including its net revenues, gross profit, gross margin, earnings and cash flows, could be adversely impacted through 2021 and likely into 2022. Future events and effects related to the COVID-19 pandemic cannot be determined with precision and actual results could significantly differ from estimates or forecasts.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation
The unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the condensed consolidated financial statements include all adjustments necessary, which are of a normal and recurring nature, for the fair presentation of the Company’s financial position and of the results of operations and cash flows for the periods presented. These interim results are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2021 or for any other interim period or for any other future fiscal year. These condensed consolidated financial statements should be read in conjunction with the Company's audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the SEC on March 1, 2021 (the “2020 10-K”). The condensed consolidated balance sheet as of December 31, 2020 has been derived from the audited financial statements at that date. There have been no material changes in the Company’s significant accounting policies from those that were disclosed in the 2020 10-K, except as noted below.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All inter-company balances and transactions have been eliminated.
Management’s Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant accounting estimates made by the Company include trade promotion accruals; useful lives of property, plant and equipment; valuation of deferred tax assets; valuation of inventory; incremental borrowing rate used to determine operating lease right-of-use assets and operating lease liabilities; assessment of contract-based factors, asset-based factors, entity-based factors and market-based factors to determine the lease term impacting right-of-use assets and lease liabilities; and the valuation of the fair value of stock options used to determine share-based compensation expense. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results could differ from those estimates and such differences may be material to the condensed consolidated financial statements.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
Convertible Senior Notes
On March 5, 2021, the Company issued $1.0 billion aggregate principal amount of its 0% Convertible Senior Notes due 2027 (the “Convertible Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). On March 12, 2021, the initial purchasers of the Convertible Notes exercised their option to purchase an additional $150.0 million aggregate principal amount of the Company’s 0% Convertible Senior Notes due 2027 (the “Additional Notes”, and together with the Convertible Notes, the “Notes”), and such Additional Notes were issued on March 16, 2021. See Note 7, Debt. The Company accounts for the Notes under Accounting Standards Update (“ASU”) No. 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (“ASU 2020-06”), which the Company early adopted in the first quarter of 2021 concurrent with the issuance of the Notes. The Company records the Notes in “Long-term liabilities” at face value net of issuance costs. If any of the conditions to the convertibility of the Notes is satisfied, or the Notes become due within one year, then the Company may be required under applicable accounting standards to reclassify the liability carrying value of the Notes as a current, rather than a long-term, liability.
Capped Call Transactions
Capped call transactions cover the aggregate number of shares of the Company’s common stock that will initially underlie the Notes, and generally reduce potential dilution to the Company’s common stock upon any conversion of Notes and/or offset any cash payments the Company may make in excess of the principal amount of the converted Notes, as the case may be, with such reduction and/or offset subject to a cap, based on the cap price of the capped call transactions. The Company determined that the freestanding capped call option contracts qualify as equity under the accounting guidance on indexation and equity classification, and recognized the contract by recording an entry to “Additional paid-in capital” (“APIC”) in stockholders’ equity in its condensed consolidated balance sheet. The Company also determined that the capped call option contracts meet the definition of a derivative under Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging (“ASC 815”), but are not required to be accounted for as a derivative as they meet the scope exception outlined in ASC 815. Instead the capped call options are recorded in APIC and not remeasured.
Issuance Costs
Issuance costs related to the Notes offering were capitalized and offset against proceeds from the Notes. Issuance costs consist of legal and other costs related to the issuance of the Notes and are amortized to interest expense over the term of the Notes. Total issuance costs capitalized in the six months ended July 3, 2021 were approximately $23.6 million, of which none remained unpaid as of July 3, 2021. There were no such issuance costs in the six months ended June 27, 2020.
Foreign Currency
Foreign currency translation income (loss), net of tax, reported as cumulative translation adjustment through “Other comprehensive income (loss)” was $0.6 million and $(0.2) million for the three months ended July 3, 2021 and June 27, 2020, respectively.
Foreign currency translation losses, net of tax, reported as cumulative translation adjustments through “Other comprehensive income (loss)” were $(0.7) million and $(0.2) million for the six months ended July 3, 2021 and June 27, 2020, respectively.
Realized and unrealized foreign currency transaction income (losses) included in “Other, net” were $0.2 million and $(0.1) million in the three and six months ended July 3, 2021, respectively. Realized and unrealized foreign currency transaction gains included in “Other, net” were $0.1 million in each of the three and six months ended June 27, 2020.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
Fair Value of Financial Instruments
The fair value measurement accounting guidance creates a fair value hierarchy to prioritize the inputs used to measure fair value into three categories. A financial instrument’s level within the fair value hierarchy is based on the lowest level of input significant to the fair value measurement, where Level 1 is the highest and Level 3 is the lowest.
The three levels are defined as follows:
•Level 1—Unadjusted quoted prices in active markets accessible by the reporting entity for identical assets or liabilities. Active markets are those in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
•Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active and model-derived valuations in which significant value drivers are observable.
•Level 3—Valuations derived from valuation techniques in which significant value drivers are unobservable.
The Company’s financial instruments include cash equivalents, accounts receivable, accounts payable, and accrued expenses, for which the carrying amounts approximate fair value due to the short-term maturity of these financial instruments. The Company’s convertible notes are carried at face value less the unamortized debt issuance costs (see Note 7).
The Company had no financial instruments measured at fair value on a recurring basis as of July 3, 2021 and December 31, 2020, other than the liability classified share-settled obligation to one of the Company’s executive officers (see Note 9) which represents a Level 1 financial instrument. There was no change in the fair value of the liability-classified share-settled obligation in the three and six months ended July 3, 2021.
There were no transfers of financial assets or liabilities into or out of Level 1, Level 2 or Level 3 for the three and six months ended July 3, 2021.
Revenue Recognition
The Company’s revenues are generated through sales of its products to distributors or customers. Revenue is recognized at the point in which the performance obligation under the terms of a contract with the customer have been satisfied and control has transferred. The Company’s performance obligation is typically defined as the accepted purchase order, the direct-to-consumer order, or the contract, with the customer which requires the Company to deliver the requested products at agreed upon prices at the time and location of the customer’s choice. The Company does not offer warranties or a right to return on the products it sells except in the instance of a product recall.
Revenue is measured as the amount of consideration the Company expects to receive in exchange for fulfilling the performance obligation. Sales and other taxes the Company collects concurrent with the sale of products are excluded from revenue. The Company's normal payment terms vary by the type and location of its customers and the products offered. The time between invoicing and when payment is due is not significant. None of the Company's customer contracts as of July 3, 2021 contains a significant financing component.
The Company routinely offers sales discounts and promotions through various programs to its customers and consumers. These programs include rebates, temporary on shelf price reductions, buy-one-get-one-free programs, off invoice discounts, retailer advertisements, product coupons and other trade activities. Provision for discounts and incentives are recorded in the same period in which the related revenues are recognized. At the end of each accounting period, the Company recognizes a liability for estimated sales discounts that have been incurred but not paid which totaled $4.1 million and
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
$3.6 million as of July 3, 2021 and December 31, 2020, respectively. The offsetting charge is recorded as a reduction of revenues in the same period when the expense is incurred.
The Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. The incremental cost to obtain contracts was not material.
Presentation of Net Revenues by Channel
The Company presents net revenues by geography and distribution channel as follows:
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Distribution Channel
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Description
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U.S. Retail
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|
Net revenues from retail sales to the U.S. market(1)
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U.S. Foodservice
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|
Net revenues from restaurant and foodservice sales to the U.S. market
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International Retail
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Net revenues from retail sales to international markets, including Canada
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International Foodservice
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Net revenues from restaurant and foodservice sales to international markets, including Canada
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____________
(1) Includes net revenues from direct-to-consumer sales.
The following table presents the Company’s net revenues by channel:
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Three Months Ended
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Six Months Ended
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(in thousands)
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July 3,
2021
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June 27,
2020
|
|
July 3,
2021
|
|
June 27,
2020
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Net revenues:
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U.S.:
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Retail
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$
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77,195
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|
|
$
|
90,040
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|
|
$
|
141,021
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|
|
$
|
139,963
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|
Foodservice
|
|
23,961
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|
|
6,486
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|
|
40,703
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|
|
29,117
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|
U.S. net revenues
|
|
101,156
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|
|
96,526
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|
|
181,724
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|
|
169,080
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International:
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Retail
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28,544
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|
9,572
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45,743
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|
|
15,524
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Foodservice
|
|
19,726
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|
7,240
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|
|
30,123
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|
|
25,808
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International net revenues
|
|
48,270
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|
|
16,812
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|
|
75,866
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|
|
41,332
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|
Net revenues
|
|
$
|
149,426
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|
|
$
|
113,338
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|
|
$
|
257,590
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|
|
$
|
210,412
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|
One distributor accounted for approximately 10% of the Company’s gross revenues in the three months ended July 3, 2021 and one distributor accounted for approximately 16% of the Company’s gross revenues in the three months ended June 27, 2020. One customer accounted for approximately 10% of the Company’s gross revenues in the six months ended July 3, 2021 and one distributor accounted for approximately 14% of the Company’s gross revenues in the six months ended June 27, 2020. No other distributor or customer accounted for more than 10% of the Company’s gross revenues in the three and six months ended July 3, 2021 and June 27, 2020.
Investment in Joint Venture
The Company uses the equity method of accounting to record transactions associated with its joint venture when the Company shares in joint control of the investee. Investment in joint venture is not consolidated but is recorded in “Other non-current assets, net” in the Company’s condensed consolidated balance sheet. The Company recognizes its portion of the investee’s results in “Equity in losses of unconsolidated joint venture” in its condensed consolidated statement of operations. Activity related to the joint venture during the three and six months ended July 3, 2021 was not material.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
Shipping and Handling Costs
Outbound shipping and handling costs included in selling, general and administrative (“SG&A”) expenses in the three months ended July 3, 2021 and June 27, 2020 were $4.9 million and $3.2 million, respectively. Outbound shipping and handling costs included in SG&A expenses in the six months ended July 3, 2021 and June 27, 2020 were $8.2 million and $4.8 million, respectively.
Recently Adopted Accounting Pronouncements
On December 18, 2019, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2019-12, “Simplifying the Accounting for Income Taxes (Topic 740)” (“ASU 2019-12”). ASU 2019-12 eliminates the need for an organization to analyze whether the following apply in a given period (1) exceptions to the incremental approach for intra-period tax allocation, (2) exceptions to accounting for basis differences when there are ownership changes in foreign investments, and (3) exceptions in interim period income tax accounting for year-to-date losses that exceed anticipated losses. ASU 2019-12 also is designed to improve financial statement preparers’ application of income tax-related guidance and simplify GAAP for (1) franchise taxes that are partially based on income, (2) transactions with a government that result in a step-up in the tax basis of goodwill, (3) separate financial statements of legal entities that are not subject to tax, and (4) enacted changes in tax laws in interim periods. For public business entities, the amendments in ASU 2019-12 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company adopted ASU 2019-12 beginning on January 1, 2021. Adoption of ASU 2019-12 did not result in any material changes to the way the tax provision is prepared and did not have a material impact on the Company’s financial position, results of operations or cash flows.
On August 5, 2020, the FASB issued ASU No. 2020-06, “Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own Equity” (“ASU 2020-06”). ASU 2020-06 simplifies accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity, by removing certain separation models that require the separation of a convertible debt instrument into a debt component and an equity or derivative component. ASU 2020-06 removes from U.S. GAAP the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature. After adoption of ASU 2020-06 entities will not separately present in equity an embedded conversion feature in such debt. Instead entities will account for a convertible debt instrument wholly as debt, and for convertible preferred stock wholly as preferred stock (i.e., as a single unit of account), unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC 815 or (2) a convertible instrument was issued at a substantial premium. ASU 2020-06 also expands disclosure requirements for convertible instruments and simplifies areas of the guidance for diluted earnings-per-share calculations that are impacted by the amendments. Under ASU 2020-06, entities must apply the more dilutive of the if-converted method and the two-class method to all convertible instruments; the treasury stock method is no longer available. ASU 2020-06 eliminates an entity’s ability to overcome the presumption of share settlement, and as a result, the issuers of convertible debt that may be settled in any combination of cash or stock at the issuer’s option, must use the more dilutive among the if-converted method and the two-class method in computing diluted net income per share, which is typically more dilutive than the net share settlement under the treasury stock method. ASU 2020-06 is effective for interim and annual periods beginning after December 15, 2021, with early adoption permitted. The Company early adopted ASU 2020-06 in the first quarter of 2021 concurrent with the issuance of its Notes. There were no changes to the Company’s previously issued financial statements since the Company had no existing convertible notes prior to issuance of the Notes in the first quarter of 2021. Upon adoption of ASU 2020-06, the Company recorded the issuance of the Notes at their face value net of issuance costs in long-term liabilities and the value of the capped call options in APIC.
Note 3. Restructuring
In May 2017, management approved a plan to terminate the Company’s exclusive supply agreement (the “Agreement”) with one of its co-manufacturers, due to non-performance under the Agreement and on
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
May 23, 2017, the Company notified the co-manufacturer of its decision to terminate the Agreement. In the three months ended July 3, 2021 and June 27, 2020, the Company recorded $3.8 million and $1.5 million, respectively, in restructuring expenses related to this dispute, which consisted primarily of legal and other expenses. In the six months ended July 3, 2021 and June 27, 2020, the Company recorded $6.3 million and $3.9 million, respectively, in restructuring expenses related to this dispute, which consisted primarily of legal and other expenses. See Note 10 for further information. As of July 3, 2021 and December 31, 2020, the Company had $2.6 million and $0.8 million, respectively, in accrued and unpaid restructuring expenses.
Note 4. Leases
Leases are classified as either finance leases or operating leases based on criteria in ASC 842. The Company has operating leases for its corporate offices, including its Manhattan Beach Project Innovation Center where the Company’s research and development facility is located, its manufacturing facilities, warehouses and vehicles, and finance leases for certain of the Company’s equipment. Such leases generally have original lease terms between two and 10 years, and often include one or more options to renew. Some leases also include early termination options, which can be exercised under specific conditions. The Company includes options to extend the lease term if the options are reasonably certain of being exercised. The Company does not have residual value guarantees or material restrictive covenants associated with its leases.
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|
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Three Months Ended
|
(in thousands)
|
|
Statement of Operations Location
|
|
July 3, 2021
|
|
June 27, 2020
|
Operating lease cost:
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|
|
|
|
|
Lease cost
|
|
Cost of goods sold
|
|
$
|
556
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|
|
$
|
468
|
|
Lease cost
|
|
Research and development expenses
|
|
191
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|
|
158
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|
Lease cost
|
|
Selling, general and administrative expenses
|
|
148
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|
|
161
|
|
Variable lease cost (1)
|
|
Cost of goods sold
|
|
1
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|
|
1
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|
Operating lease cost
|
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|
|
$
|
896
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|
|
$
|
788
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|
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|
|
|
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|
|
Short-term lease cost
|
|
Selling, general and administrative expenses
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|
$
|
87
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|
|
$
|
111
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|
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|
|
|
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|
|
Finance lease cost:
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|
|
|
|
|
Amortization of right-of use assets
|
|
Cost of goods sold
|
|
$
|
47
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|
|
$
|
20
|
|
Interest on lease liabilities
|
|
Interest expense
|
|
5
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|
|
3
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|
Finance lease cost
|
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|
|
$
|
52
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|
|
$
|
23
|
|
|
|
|
|
|
|
|
Total lease cost
|
|
|
|
$
|
1,035
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|
|
$
|
922
|
|
____________
(1) Variable lease cost primarily consists of common area maintenance, such as cleaning and repairs.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
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|
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|
|
|
|
|
|
|
|
|
Six Months Ended
|
(in thousands)
|
|
Statement of Operations Location
|
|
July 3, 2021
|
|
June 27, 2020
|
Operating lease cost:
|
|
|
|
|
|
|
Lease cost
|
|
Cost of goods sold
|
|
$
|
1,095
|
|
|
$
|
652
|
|
Lease cost
|
|
Research and development expenses
|
|
339
|
|
|
283
|
|
Lease cost
|
|
Selling, general and administrative expenses
|
|
345
|
|
|
273
|
|
Variable lease cost (1)
|
|
Cost of goods sold
|
|
29
|
|
|
7
|
|
Operating lease cost
|
|
|
|
$
|
1,808
|
|
|
$
|
1,215
|
|
|
|
|
|
|
|
|
Short-term lease cost
|
|
Selling, general and administrative expenses
|
|
$
|
113
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|
|
$
|
175
|
|
|
|
|
|
|
|
|
Finance lease cost:
|
|
|
|
|
|
|
Amortization of right-of use assets
|
|
Cost of goods sold
|
|
$
|
84
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|
|
$
|
38
|
|
Interest on lease liabilities
|
|
Interest expense
|
|
10
|
|
|
7
|
|
Finance lease cost
|
|
|
|
$
|
94
|
|
|
$
|
45
|
|
|
|
|
|
|
|
|
Total lease cost
|
|
|
|
$
|
2,015
|
|
|
$
|
1,435
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|
____________
(1) Variable lease cost primarily consists of common area maintenance, such as cleaning and repairs.
Supplemental balance sheet information as of July 3, 2021 and December 31, 2020 related to leases are as follows:
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|
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|
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(in thousands)
|
|
Balance Sheet Location
|
|
July 3, 2021
|
|
December 31, 2020
|
Assets
|
|
|
|
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|
|
Operating leases
|
|
Operating lease right-of-use assets
|
|
$
|
14,672
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|
|
$
|
14,570
|
|
Finance leases, net
|
|
Property, plant and equipment, net
|
|
708
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|
|
212
|
|
Prepaid lease costs, non-current(1)
|
|
Prepaid lease costs, non-current
|
|
26,578
|
|
|
—
|
|
Total lease assets
|
|
|
|
$
|
41,958
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|
|
$
|
14,782
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|
|
|
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|
|
|
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Liabilities
|
|
|
|
|
|
|
Current:
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|
|
|
|
|
Operating lease liabilities
|
|
Current portion of operating lease liabilities
|
|
$
|
3,651
|
|
|
$
|
3,095
|
|
Finance lease liabilities
|
|
Short-term finance lease liabilities
|
|
184
|
|
|
71
|
|
Long-term:
|
|
|
|
|
|
|
Operating lease liabilities
|
|
Operating lease liabilities, net of current portion
|
|
11,300
|
|
|
11,793
|
|
Finance lease liabilities
|
|
Finance lease obligations and other long-term liabilities
|
|
533
|
|
|
149
|
|
Total lease liabilities
|
|
|
|
$
|
15,668
|
|
|
$
|
15,108
|
|
_______________
(1) Payments to a construction escrow account for the Campus Lease that has not commenced as of July 3, 2021. See Note 10.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
The following is a schedule by year of the maturities of lease liabilities with original terms in excess of one year, as of July 3, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 3, 2021
|
(in thousands)
|
|
Operating Leases
|
|
Finance Leases
|
Remainder of 2021
|
|
$
|
1,964
|
|
|
$
|
101
|
|
2022
|
|
4,000
|
|
|
194
|
|
2023
|
|
3,327
|
|
|
181
|
|
2024
|
|
1,715
|
|
|
146
|
|
2025
|
|
1,322
|
|
|
115
|
|
2026
|
|
1,644
|
|
|
10
|
|
Thereafter
|
|
2,270
|
|
|
—
|
|
Total undiscounted future minimum lease payments
|
|
16,242
|
|
|
747
|
|
Less imputed interest
|
|
(1,291)
|
|
|
(30)
|
|
Total discounted future minimum lease payments
|
|
$
|
14,951
|
|
|
$
|
717
|
|
Weighted average remaining lease terms and weighted average discount rates were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 3, 2021
|
|
|
Operating Leases
|
|
Finance Leases
|
Weighted average remaining lease term (years)
|
|
5.9
|
|
4.1
|
Weighted average discount rate
|
|
2.7
|
%
|
|
2.3
|
%
|
Note 5. Inventories
Major classes of inventory were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
July 3,
2021
|
|
December 31,
2020
|
Raw materials and packaging
|
$
|
86,998
|
|
|
$
|
83,702
|
|
Work in process
|
31,908
|
|
|
12,887
|
|
Finished goods
|
46,840
|
|
|
25,128
|
|
Total
|
$
|
165,746
|
|
|
$
|
121,717
|
|
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
Note 6. Property, Plant and Equipment
Property, plant, and equipment are stated at cost and finance lease assets are included. A summary of property, plant, and equipment as of July 3, 2021 and December 31, 2020, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
July 3,
2021
|
|
December 31,
2020
|
Manufacturing equipment
|
|
$
|
82,284
|
|
|
$
|
62,521
|
|
Research and development equipment
|
|
15,162
|
|
|
12,342
|
|
Leasehold improvements
|
|
16,836
|
|
|
9,277
|
|
Building
|
|
12,712
|
|
|
12,569
|
|
Finance leases
|
|
867
|
|
|
212
|
|
Software
|
|
1,071
|
|
|
402
|
|
Furniture and fixtures
|
|
642
|
|
|
614
|
|
Vehicles
|
|
584
|
|
|
377
|
|
Land
|
|
3,953
|
|
|
3,995
|
|
Assets not yet placed in service
|
|
64,955
|
|
|
46,148
|
|
Total property, plant and equipment
|
|
$
|
199,066
|
|
|
$
|
148,457
|
|
Accumulated depreciation and amortization
|
|
(41,617)
|
|
|
(33,158)
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
$
|
157,449
|
|
|
$
|
115,299
|
|
Depreciation and amortization expense for the three months ended July 3, 2021 and June 27, 2020 was $4.9 million and $3.3 million, respectively. Of the total depreciation and amortization expense in the three months ended July 3, 2021 and June 27, 2020, $3.9 million and $2.5 million, respectively, were recorded in cost of goods sold; $0.9 million and $0.7 million, respectively, were recorded in research and development expenses; and $30,000 and $0.1 million, respectively, were recorded in SG&A expenses in the Company’s condensed consolidated statements of operations.
Depreciation and amortization expense for the six months ended July 3, 2021 and June 27, 2020 was $9.2 million and $5.9 million, respectively. Of the total depreciation and amortization expense in the six months ended July 3, 2021 and June 27, 2020, $7.4 million and $4.4 million, respectively, were recorded in cost of goods sold; $1.8 million and $1.4 million, respectively, were recorded in research and development expenses; and $60,000 and $0.1 million, respectively, were recorded in SG&A expenses in the Company’s condensed consolidated statements of operations.
The Company had no property, plant and equipment that meet the criteria for assets held for sale as of July 3, 2021 and December 31, 2020, respectively. Amounts previously classified as assets held for sale were sold for amounts that approximated book value for which a note receivable of $4.5 million, net of payments received, was recorded, of which $4.0 million is included in “Prepaid expenses and other current assets” and $0.5 million is included in “Other non-current assets, net” in the Company’s condensed consolidated balance sheet at July 3, 2021. At December 31, 2020, the Company had a note receivable of $4.6 million from the sale of assets held for sale, of which $2.4 million was included in “Prepaid expenses and other current assets” and $2.2 million was included in “Other non-current assets, net” in the Company’s condensed consolidated balance sheet.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
Note 7. Debt
The following is a summary of debt balances as of July 3, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
July 3,
2021
|
|
December 31,
2020
|
Convertible senior notes
|
|
|
$
|
1,150,000
|
|
|
$
|
—
|
|
Revolving credit facility
|
|
|
—
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt issuance costs
|
|
|
(22,293)
|
|
|
—
|
|
Total debt outstanding
|
|
|
$
|
1,127,707
|
|
|
$
|
25,000
|
|
Less: current portion of long-term debt
|
|
|
—
|
|
|
25,000
|
|
Long-term debt
|
|
|
$
|
1,127,707
|
|
|
$
|
—
|
|
Convertible Senior Notes
On March 5, 2021, the Company issued $1.0 billion aggregate principal amount of its 0% Convertible Senior Notes due 2027 (the “Convertible Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act. On March 12, 2021, the initial purchasers of the Convertible Notes exercised their option to purchase an additional $150.0 million aggregate principal amount of the Company’s 0% Convertible Senior Notes due 2027 (the “Additional Notes”, and together with the Convertible Notes, the “Notes”), and such Additional Notes were issued on March 16, 2021. The initial conversion price of the Notes is $206.00 per share of common stock, which represents a premium of approximately 47.5% over the closing price of the Company’s common stock on March 2, 2021. The Notes will mature on March 15, 2027, unless earlier repurchased, redeemed or converted. The Notes were issued pursuant to, and are governed by, an indenture, dated as of March 5, 2021, (the “Indenture”) between the Company and U.S. Bank National Association, as trustee (the Trustee”). The Company used $84.0 million of the net proceeds from the sale of the Notes to fund the cost of entering into capped call transactions, described below. The proceeds from the issuance of the Notes were approximately $1.0 billion, net of capped call transaction costs of $84.0 million and debt issuance costs totaling $23.6 million.
The Notes are senior, unsecured obligations and are (i) equal in right of payment with the Company’s senior, unsecured indebtedness; (ii) senior in right of payment to the Company’s indebtedness that is expressly subordinated to the Notes; (iii) effectively subordinated to the Company’s secured indebtedness, to the extent of the value of the collateral securing that indebtedness; and (iv) structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and (to the extent the Company is not a holder thereof) preferred equity, if any, of the Company’s subsidiaries.
The Notes do not bear regular interest, and the principal amount of the Notes do not accrete. However, special interest and additional interest may accrue on the Notes at a rate per annum not exceeding 0.50% (subject to certain exceptions) upon the occurrence of certain events relating to the failure to file certain SEC reports or to remove certain restrictive legends from the Notes.
The initial conversion rate is 4.8544 shares of common stock per $1,000 principal amount of the Notes, which represents an initial conversion price of $206.00 per share of common stock. The conversion rate and conversion price are subject to customary adjustments upon the occurrence of certain events as described in the Indenture.
The holder may convert the Notes during the five consecutive business days immediately after any ten consecutive trading day period, if the trading price per $1,000 principal amount of Notes, as determined following a request by a holder, for each trading day of the measurement period was less than ninety eight percent (98%) of the product of the last report sale price per share of common stock on such trading day and the conversion rate on such trading day.
The holder can convert its Notes during any calendar quarter, commencing after the calendar quarter ending on June 30, 2021, provided the last reported sale price of the common stock for at least 20 trading
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
days is greater than or equal to 130% of the conversion price, during the 30 days consecutive trading days ending on the last trading day of a calendar quarter.
Before December 15, 2026, noteholders have the right to convert their Notes upon the occurrence of certain events. From and after December 15, 2026, noteholders may convert their Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date. The Company has the right to elect to settle conversions either in cash, shares or in a combination of cash and shares of its common stock. However, upon conversion of any Notes, the conversion value, which will be determined over an “Observation Period” (as defined in the Indenture) consisting of 20 trading days, will be paid in cash up to at least the principal amount of the Notes being converted.
The Notes will be redeemable, in whole or in part, at the Company’s option at any time, and from time to time, on or after March 20, 2024 and on or before the 20th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid special interest and additional interest, if any, to, but excluding, the redemption date, but only if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and (ii) the trading day immediately before the date the Company sends such notice. In addition, calling any Note for redemption will constitute a “Make-Whole Fundamental Change” (as defined in the Indenture) with respect to that Note, in which case the conversion rate applicable to the conversion of that Note will be increased in certain circumstances if it is converted after it is called for redemption.
The Company must repay the note principal in cash, but may elect to settle the conversion value either in cash, shares or in a combination of cash and shares of its common stock.
If certain corporate events that constitute a “Fundamental Change” (as defined in the Indenture) occur, then, subject to limited exceptions, noteholders may require the Company to repurchase their Notes at a cash repurchase price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid special interest and additional interest, if any, to, but excluding, the fundamental change repurchase date. The definition of Fundamental Change includes certain business combination transactions involving the Company and certain de-listing events with respect to the Company’s common stock.
The Notes have customary provisions relating to the occurrence of “Events of Default” (as defined in the Indenture), which include the following: (i) certain payment defaults on the Notes (which, in the case of a default in the payment of special interest and additional interest on the Notes, are subject to a 30-day cure period); (ii) the Company’s failure to send certain notices under the Indenture within specified periods of time; (iii) the Company’s failure to comply with certain covenants in the Indenture relating to the Company’s ability to consolidate with or merge with or into, or sell, lease or otherwise transfer, in one transaction or a series of transactions, all or substantially all of the assets of the Company and its subsidiaries, taken as a whole, to another person; (iv) a default by the Company in its other obligations or agreements under the Indenture or the Notes if such default is not cured or waived within 60 days after notice is given in accordance with the Indenture; (v) certain defaults by the Company or any of its significant subsidiaries with respect to indebtedness for borrowed money of at least $100 million; and (vi) certain events of bankruptcy, insolvency and reorganization involving the Company or any of its significant subsidiaries.
In the event of the Company’s liquidation, dissolution or winding up, holders of the Company’s common stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of the Company’s debts and other liabilities and the satisfaction of any liquidation preference granted to the holders of any then-outstanding shares of preferred stock.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
Holders of the Company’s common stock have no preemptive, conversion, subscription or other rights, and there are no redemption or sinking fund provisions applicable to the Company’s common stock. The rights, preferences and privileges of the holders of the Company’s common stock are subject to and may be adversely affected by the rights of the holders of shares of any series of preferred stock that the Company may designate in the future.
If an Event of Default involving bankruptcy, insolvency or reorganization events with respect to the Company (and not solely with respect to a significant subsidiary of the Company) occurs, then the principal amount of, and any accrued and unpaid special interest and additional interest on, all of the Notes then outstanding will immediately become due and payable without any further action or notice by any person. If any other Event of Default occurs and is continuing, then, the Trustee, by notice to the Company, or noteholders of at least 25% of the aggregate principal amount of Notes then outstanding, may declare the principal amount of, and any accrued and unpaid special interest and additional interest on, all of the Notes then outstanding to become due and payable immediately. However, notwithstanding the foregoing, the Company may elect, at its option, that the sole remedy for an Event of Default relating to certain failures by the Company to comply with certain reporting covenants in the Indenture consists exclusively of the right of the noteholders to receive special interest on the Notes for up to 365 days at a specified rate per annum not exceeding 0.50% on the principal amount of the Notes.
The total amount of debt issuance costs of $23.6 million was recorded as a reduction to “Convertible senior notes, net” in the condensed consolidated balance sheet and are being amortized as interest expense over the term of the Notes using the effective interest method. During the three and six months ended July 3, 2021, the Company recognized $1.0 million and $1.3 million, respectively, in interest expense related to the amortization of the debt issuance costs related to the Notes. There was no such expense in the three and six months ended June 27, 2020.
The following is a summary of the Company’s Notes as of July 3, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Principal Amount
|
|
Unamortized Issuance Costs
|
|
Net Carrying Amount
|
|
Fair Value
|
|
|
|
|
Amount
|
|
Leveling
|
0% Convertible senior notes due on March 15, 2027
|
|
$1,150,000
|
|
$22,293
|
|
$1,127,707
|
|
$1,155,750
|
|
Level 2
|
|
|
|
|
|
|
|
|
|
|
|
The Notes are carried at face value less the unamortized debt issuance costs on the Company’s condensed consolidated balance sheets. As of July 3, 2021, the estimated fair value of the Notes was approximately $1.2 billion. The Notes are quoted on the Intercontinental Exchange and are classified as Level 2 financial instruments. The estimated fair value of the Notes was determined based on the actual bid price of the Notes on July 2, 2021, the last business day of the period.
As of July 3, 2021, the remaining life of the Notes is approximately 5.7 years.
Capped Call Transactions
On March 2, 2021, in connection with the pricing of the offering of the Convertible Notes, the Company entered into capped call transactions (the “Base Capped Call Transactions”) with the option counterparties and used $73.0 million in net proceeds from the sale of the Convertible Notes to fund the cost of the Base Capped Call Transactions. On March 12, 2021, in connection with the Additional Notes, the Company entered into capped call transactions (the “Additional Capped Call Transactions”) with the option counterparties and used $11.0 million of the net proceeds from the sale of the Additional Notes to fund the cost of the Additional Capped Call Transactions. The Base Capped Call Transactions and the Additional Capped Call Transactions (collectively, the “Capped Call Transactions”) cover, subject to customary adjustments, the aggregate number of shares of the Company’s common stock that will initially underlie the Notes, and are expected generally to reduce potential dilution to the Company’s common
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
stock upon any conversion of Notes and/or offset any cash payments the Company may make in excess of the principal amount of the converted Notes, as the case may be, with such reduction and/or offset subject to a cap, based on the cap price of the Capped Call Transactions. The cap price of the Capped Call Transactions is $279.32, which represents a premium of 100% over the last reported sale price of the Company’s common stock on March 2, 2021. The aggregate $84.0 million paid for the Capped Call Transactions was recorded as a reduction to APIC.
Revolving Credit Facility
On March 2, 2021, the Company terminated its secured revolving credit agreement, dated as of April 21, 2020 (the “Credit Agreement”), among the Company, as borrower, the lenders party thereto and JPMorgan Chase Bank, N.A., as the administrative agent, and in connection with such termination: (i) all borrowings outstanding under the Credit Agreement were repaid in full by the Company; and (ii) all liens and security interests under the Credit Agreement in favor of the lenders thereunder were released.
The Company recorded debt issuance costs on the revolving credit facility in “Prepaid and other non-current assets, net” in the accompanying condensed consolidated balance sheet. Debt issuance costs associated with the revolving credit facility were amortized as interest expense over the term of the loan. In the three and six months ended July 3, 2021, debt issuance costs of $0 and $41,000, respectively, related to the Company’s prior revolving credit facility were amortized to interest expense. In the three and six months ended June 27, 2020, debt issuance costs of $57,000 and $93,000, respectively, related to the Company’s prior revolving credit facility and equipment loan were amortized to interest expense.
In the three months ended July 3, 2021 and June 27, 2020, the Company incurred $0 and $0.4 million, respectively, in interest expense related to its bank credit facilities. In the six months ended July 3, 2021 and June 27, 2020, the Company incurred $0.3 million and $0.9 million, respectively, in interest expense related to its bank credit facilities. In the three and six months ended June 27, 2020, the Company incurred $0.1 million and $0.2 million, respectively, in interest expense related to its equipment loan facility, which was terminated on April 21, 2020.
As of December 31, 2020, the Company had $25.0 million in outstanding borrowings and had no excess availability under the revolving credit facility. On February 25, 2021, the Company paid down the outstanding borrowings and had no borrowings outstanding under the revolving credit facility. The revolving credit facility was terminated on March 2, 2021. Upon termination of the revolving credit facility, unamortized debt issuance costs of $1.0 million associated with the revolving credit facility were written off as “Loss on extinguishment of debt,” which is included in “Other, net” in the condensed consolidated statement of operations.
Concurrent with the Company’s execution of the campus headquarters lease, as a security deposit, the Company delivered to the landlord a letter of credit under the revolving credit facility in the amount of $12.5 million. Upon termination of the revolving credit facility, the letter of credit continued in effect, unsecured.
Note 8. Stockholders’ Equity
As of July 3, 2021, the Company’s shares consisted of 500,000,000 authorized shares of common stock, par value $0.0001 per share, of which 63,243,498 shares of common stock were issued and outstanding, and 500,000 authorized shares of preferred stock, par value $0.0001 per share, of which no shares were issued and outstanding.
As of December 31, 2020, the Company’s shares consisted of 500,000,000 authorized shares of common stock, par value $0.0001 per share, of which 62,820,351 shares were issued and outstanding, and 500,000 authorized shares of preferred stock, par value $0.0001 per share, of which no shares were issued and outstanding.
The Company has not declared or paid any dividends, or authorized or made any distribution upon or with respect to any class or series of its capital stock.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
Note 9. Share-Based Compensation
In 2019, the Company’s 2011 Equity Incentive Plan was amended, restated and re-named the 2018 Equity Incentive Plan (the “2018 Plan”), and the remaining shares available for issuance under the 2011 Plan were added to the shares reserved for issuance under the 2018 Plan. As of January 1, 2021, the maximum aggregate number of shares that may be issued under the 2018 Plan increased to 18,771,398 shares, which includes an increase of 2,144,521 shares effective January 1, 2021 under the terms of the 2018 Plan.
The following table summarizes the shares available for grant under the 2018 Plan:
|
|
|
|
|
|
|
Shares Available for Grant
|
Balance - December 31, 2020
|
5,021,270
|
|
Authorized
|
2,144,521
|
|
Granted
|
(225,184)
|
|
Shares withheld to cover taxes
|
13,109
|
|
Forfeited
|
88,156
|
|
Balance - July 3, 2021
|
7,041,872
|
|
|
|
As of July 3, 2021 and December 31, 2020, there were 3,892,262 and 4,218,278 shares, respectively, issuable under stock options outstanding; 303,392 and 275,989 shares, respectively, issuable under unvested RSUs outstanding; 7,561,863 and 7,127,079 shares, respectively, issued for stock option exercises, RSU settlement, and restricted stock grants; and 7,041,872 and 5,021,270 shares, respectively, available for grant under the 2018 Plan.
Stock Options
Following are the assumptions used in the Black-Scholes valuation model for options granted during the periods shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
July 3,
2021
|
|
June 27,
2020
|
|
July 3,
2021
|
|
June 27,
2020
|
Risk-free interest rate
|
|
1.3%
|
|
0.5%
|
|
1.3%
|
|
0.7%
|
Average expected term (years)
|
|
7.0
|
|
7.0
|
|
7.0
|
|
7.0
|
Expected volatility
|
|
74.0%
|
|
55.0%
|
|
72.8%
|
|
55.0%
|
Dividend yield
|
|
—
|
|
—
|
|
—
|
|
—
|
Option grants to new employees in the six months ended July 3, 2021 and June 27, 2020 generally vest 25% of the total award on the first anniversary of the vesting commencement date, and thereafter vest monthly over the remaining 3-year period, subject to continued employment through the vesting date. Option grants to continuing employees in the six months ended July 3, 2021 and June 27, 2020 generally vest monthly over a 48-month period, subject to continued employment through the vesting date. An option grant to one executive officer in the six months ended July 3, 2021 vested over three months from the vesting commencement date.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
The following table summarizes the Company’s stock option activity during the six months ended July 3, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of
Stock
Options
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Contractual
Life (Years)
|
|
Aggregate
Intrinsic
Value (in thousands)(1)
|
Outstanding at December 31, 2020
|
4,218,278
|
|
|
$
|
21.20
|
|
|
6.6
|
|
$
|
443,595
|
|
Granted
|
107,614
|
|
|
$
|
136.91
|
|
|
—
|
|
$
|
—
|
|
Exercised
|
(370,884)
|
|
|
$
|
17.50
|
|
|
—
|
|
$
|
42,141
|
|
Cancelled/Forfeited
|
(62,746)
|
|
|
$
|
38.16
|
|
|
—
|
|
$
|
—
|
|
Outstanding at July 3, 2021
|
3,892,262
|
|
|
$
|
24.47
|
|
|
6.1
|
|
$
|
494,019
|
|
Vested and exercisable at July 3, 2021
|
2,755,956
|
|
|
$
|
12.03
|
|
|
5.3
|
|
$
|
383,659
|
|
Vested and expected to vest at July 3, 2021
|
3,657,335
|
|
|
$
|
21.04
|
|
|
6.0
|
|
$
|
476,710
|
|
__________
(1) Aggregate intrinsic value is calculated as the difference between the value of common stock on the transaction date and the exercise price multiplied by the number of shares issuable under the stock option. Aggregate intrinsic value of shares outstanding at the beginning and end of the reporting period is calculated as the difference between the value of common stock on the beginning and end dates, respectively, and the exercise price multiplied by the number of shares outstanding.
During the three months ended July 3, 2021 and June 27, 2020, the Company recorded $3.7 million and $3.6 million, respectively, of share-based compensation expense related to options. During the six months ended July 3, 2021 and June 27, 2020, the Company recorded $7.1 million and $6.6 million, respectively, of share-based compensation expense related to options. The share-based compensation expense is included in cost of goods sold, research and development expenses and SG&A expenses in the Company’s condensed consolidated statements of operations.
As of July 3, 2021, there was $19.3 million in unrecognized compensation expense related to nonvested stock option awards which is expected to be recognized over a weighted average period of 1.7 years.
Restricted Stock Units
RSU grants to new employees in the six months ended July 3, 2021 and June 27, 2020 vest 25% of the total award on the first anniversary of the vesting commencement date, and thereafter vest quarterly over the remaining 3 years of the award, subject to continued employment through the vesting date. RSU grants in the six months ended July 3, 2021 include fully vested RSUs granted to an executive officer issued in settlement of the obligation discussed below under Share-Settled Obligation. An RSU grant to one executive officer in the six months ended July 3, 2021 vested 100% over three months from the vesting commencement date. RSU grants to continuing employees in the six months ended July 3, 2021 and June 27, 2020 generally vest quarterly over 16 quarters, subject to continued employment through the vesting date. An RSU grant to one executive officer in the six months ended July 3, 2021 vests quarterly over four quarters, subject to continued employment through the vesting date. Annual RSU grants to directors on the Company’s Board of Directors (the “Board”) vest monthly over a one year period and RSU grants to new directors on the Board vest monthly over a three year period. RSU grants to nonemployee brand ambassadors in the six months ended July 3, 2021 vest quarterly over four quarters from the vesting commencement date, subject to continued service through the vesting date. RSU grants to consultants in the six months ended June 27, 2020 vest quarterly over eight quarters from the vesting commencement date, subject to continued service through the vesting date.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
The following table summarizes the Company’s RSU activity during the six months ended July 3, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Units
|
|
Weighted
Average
Grant Date Fair Value Per Unit
|
Unvested at December 31, 2020
|
|
275,989
|
|
|
$
|
114.99
|
|
Granted
|
|
117,570
|
|
|
$
|
125.41
|
|
Vested(1)
|
|
(64,757)
|
|
|
$
|
121.00
|
|
Cancelled/Forfeited
|
|
(25,410)
|
|
|
$
|
—
|
|
Unvested at July 3, 2021
|
|
303,392
|
|
|
$
|
118.17
|
|
________
(1) Includes 13,109 shares of common stock that were withheld to cover taxes on the release of vested RSUs and became available for future grants pursuant to the 2018 Plan.
During the three months ended July 3, 2021 and June 27, 2020, the Company recorded $3.3 million and $2.7 million, respectively, of share-based compensation expense related to RSUs. During the six months ended July 3, 2021 and June 27, 2020, the Company recorded $6.3 million and $4.3 million, respectively, of share-based compensation expense related to RSUs. The share-based compensation expense is included in cost of goods sold, research and development expenses and SG&A expenses in the Company’s condensed consolidated statements of operations.
As of July 3, 2021, there was $18.9 million in unrecognized compensation expense related to unvested RSUs which is expected to be recognized over a weighted average period of 1.6 years.
Share-Settled Obligation
Share-based compensation expense in the three months ended July 3, 2021 and June 27, 2020 includes $0.8 million and $0.9 million, respectively, for a liability classified, share-settled obligation to an executive officer related to a sign-on award pursuant to the terms of the executive officer’s offer letter. Share-based compensation expense in the six months ended July 3, 2021 and June 27, 2020 includes $1.6 million and $1.8 million, respectively, for a liability classified, share-settled obligation to an executive officer related to a sign-on award pursuant to the terms of the executive officer’s offer letter. The share-based compensation expense related to this share-settled obligation is included in SG&A expenses in the Company’s condensed consolidated statements of operations.
The Company is obligated to deliver a variable number of shares based on a fixed monetary amount on the first annual anniversary of the executive officer’s commencement date and on each quarterly anniversary thereafter through the second annual anniversary. The liability classified award is considered unearned until the requirements for issuance of the shares are met and is included in “Accrued expenses and other current liabilities” on the Company’s condensed consolidated balance sheets as of July 3, 2021 and December 31, 2020 in the amount of $1.0 million. As of July 3, 2021, there was $0.7 million in unrecognized compensation expense related to this share-settled obligation which is expected to be recognized over approximately 0.2 years.
In the first six months of 2021, two quarterly tranches related to this obligation were earned, and the Company delivered to this executive officer 13,804 fully vested RSUs with a settlement date fair value of $1.6 million.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
Restricted Stock to Nonemployees
The following table summarizes the Company’s restricted stock activity during the six months ended July 3, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of Shares of
Restricted Stock
|
|
Weighted
Average
Remaining
Contractual
Life (Years)
|
|
Weighted
Average
Grant Date
Fair Value
Per Share
|
Unvested at December 31, 2020
|
12,184
|
|
|
0.3
|
|
$
|
20.02
|
|
Granted
|
—
|
|
|
—
|
|
$
|
—
|
|
Vested/Released
|
(12,184)
|
|
|
—
|
|
$
|
20.02
|
|
Cancelled/Forfeited
|
—
|
|
|
—
|
|
$
|
—
|
|
Unvested at July 3, 2021
|
—
|
|
|
—
|
|
$
|
—
|
|
As of July 3, 2021, no shares of restricted stock that had been purchased by nonemployee brand ambassadors remained subject to vesting requirements and repurchase pursuant to restricted stock purchase agreements.
During the three months ended July 3, 2021 and June 27, 2020, the Company recorded $34,000 and $0.4 million, respectively, of share-based compensation expense related to restricted stock issued to nonemployee brand ambassadors, which is included in SG&A expenses in the Company’s condensed consolidated statements of operations.
During the six months ended July 3, 2021 and June 27, 2020, the Company recorded $0.2 million and $0.8 million, respectively, of share-based compensation expense related to restricted stock issued to nonemployee brand ambassadors, which is included in SG&A expenses in the Company’s condensed consolidated statements of operations.
As of July 3, 2021, there was no unrecognized compensation expense related to unvested restricted stock granted to nonemployee brand ambassadors.
Employee Stock Purchase Plan
As of July 3, 2021, the maximum aggregate number of shares that may be issued under the 2018 Employee Stock Purchase Plan (the “ESPP”) was 1,876,455 shares of common stock, including an increase of 536,130 shares effective January 1, 2021 under the terms of the ESPP. The ESPP is expected to be implemented through a series of offerings under which participants are granted purchase rights to purchase shares of the Company’s common stock on specified dates during such offerings. The administrator has not yet approved an offering under the ESPP.
Note 10. Commitments and Contingencies
Leases
On January 14, 2021, the Company entered into a Lease (the “Campus Lease”) with HC Hornet Way, LLC, a Delaware limited liability company (the “Landlord”), to house the Company’s headquarters offices, lab and innovation space in El Segundo, California. The initial term of the Campus Lease is 12 years, commencing on the earlier of 210 days following substantial completion of the base building by the Landlord or the date the Company occupies any portion of the Premises (other than Phase I-A) for purposes of conducting business operations therein, subject to adjustment as provided in the Campus Lease. The Company has two renewal options, each for a period of five years.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
Under the terms of the Campus Lease, the Company will lease an aggregate of approximately 281,110 rentable square feet in a portion of a building located at 888 Douglas Street, El Segundo, California (the “Premises”), to be built out by the Landlord and delivered to the Company in three phases over a 26-month period. Aggregate payments towards base rent for the Premises over the term of the lease will be approximately $159.3 million.
Although the Company is involved in the design of the tenant improvements of the Premises, the Company does not have title or possession of the assets during construction. In addition, the Company does not have the ability to control the leased Premises until each phase of the tenant improvements is complete. As of July 3, 2021, the tenant improvements associated with Phase 1-A had not been completed, and the underlying asset had not been delivered to the Company. Accordingly, there was no lease commencement during the quarter ended July 3, 2021. Therefore, the Company has not recognized an asset or a liability for the Campus Lease in its condensed consolidated balance sheet as of July 3, 2021. The Company contributed $26.6 million in payments to a construction escrow account during the second quarter of 2021. These payments are recorded in “Prepaid lease costs, non-current” in the Company’s condensed consolidated balance sheet as of July 3, 2021, which will ultimately be recorded as a component of a right-of-use asset upon lease commencement. The Company anticipates further contributions as the Landlord continues to build out the Premises and anticipates that Phase-1A will be completed and the lease commencement date will occur during the fourth quarter of 2021 or the first quarter of 2022.
Concurrent with the Company’s execution of the Campus Lease, as a security deposit, the Company delivered to the Landlord a letter of credit in the amount of $12.5 million which amount will decrease to: (i) $6.3 million on the fifth (5th) anniversary of the Rent Commencement Date (as defined in the Campus Lease); (ii) $3.1 million on the eighth (8th) anniversary of the Rent Commencement Date; and (iii) $0 in the event the Company receives certain credit ratings; provided the Company is not then in default of its obligations under the Campus Lease. Upon termination of the revolving credit facility, the letter of credit continued in effect, unsecured.
China Investment and Lease Agreement
On September 22, 2020, the Company and BYND JX entered into an investment agreement with the Administrative Committee (the “JX Committee”) of the Jiaxing Economic & Technological Development Zone (the “JXEDZ”) pursuant to which, among other things, BYND JX has agreed to make certain investments in the JXEDZ in two phases of development, and the Company has agreed to guarantee certain repayment obligations of BYND JX under such agreement. In the second quarter of 2021, the Company received $0.2 million in subsidies related to its investment in BYND JX from the Jiaxing Economic Development Zone Finance Bureau which is recorded in “Other, net” in the Company’s condensed consolidated statement of operations.
During Phase 1, the Company has agreed to invest $10.0 million in the JXEDZ through an intercompany investment in BYND JX and BYND JX has agreed to lease a facility in the JXEDZ for a minimum of two (2) years. In connection with such agreement, BYND JX entered into a factory leasing contract with an affiliate of the JX Committee, pursuant to which BYND JX has agreed to lease and renovate a facility in the JXEDZ and lease it for a minimum of two (2) years. In the event that the Company and BYND JX determine, in their sole discretion, to proceed with the Phase 2 development in the JXEDZ, BYND JX has agreed in the first stage of Phase 2 to increase its registered capital by $30.0 million and to acquire the land use right to a state-owned land plot in the JXEDZ to conduct development and construction of a new production facility. Following the first stage of Phase 2, the Company and BYND JX may determine, in their sole discretion, to permit BYND JX to obtain a second state-owned land plot in the JXEDZ in order to construct an additional facility thereon.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
Purchase Commitments
As of July 3, 2021, the Company had a commitment to purchase pea protein inventory totaling $124.1 million, approximately $44.9 million in the remainder of 2021 and $79.2 million in 2022. In addition, as of July 3, 2021, the Company had approximately $62.3 million in purchase order commitments for capital expenditures primarily to purchase machinery and equipment. Payments for these purchases will be due within 12 months from July 3, 2021.
Litigation
Don Lee Farms
On May 25, 2017, Don Lee Farms, a division of Goodman Food Products, Inc., filed a complaint against the Company in the Superior Court of the State of California for the County of Los Angeles asserting claims for breach of contract, misappropriation of trade secrets, unfair competition under the California Business and Professions Code, money owed and due, declaratory relief and injunctive relief, each arising out of the Company’s decision to terminate an exclusive supply agreement between the Company and Don Lee Farms. The Company denied all of these claims and filed counterclaims on July 27, 2017, alleging breach of contract, unfair competition under the California Business and Professions Code and conversion. In October 2018, the former co-manufacturer filed an amended complaint that added one of the Company’s then current contract manufacturers as a defendant, principally for claims arising from the then current contract manufacturer’s alleged use of the former co-manufacturer’s alleged trade secrets, and for replacing the former co-manufacturer as one of the Company’s co-manufacturers. The then current contract manufacturer filed an answer denying all of Don Lee Farms’ claims and a cross-complaint against Beyond Meat asserting claims of total and partial equitable indemnity, contribution, and repayment. On March 11, 2019, Don Lee Farms filed a second amended complaint to add claims of fraud and negligent misrepresentation against the Company. On May 30, 2019, the judge denied the Company’s motion to dismiss the fraud and negligent misrepresentation claims, allowing the claims to proceed. On June 19, 2019, the Company filed an answer denying Don Lee Farms' claims.
On January 24, 2020, a writ judge granted Don Lee Farms a right to attach in the amount of $628,689 on the grounds that Don Lee Farms had established a “probable validity” of its claim that Beyond Meat owes Don Lee Farms money for a small batch of unpaid invoices. This determination was not made by the trial judge. The trial judge has yet to determine the legitimacy or merits of Don Lee Farms’ claims.
On January 27, 2020, Don Lee Farms filed a third amended complaint to add three individual defendants, all of whom are current or former employees of the Company, including Mark Nelson, the Company’s former Chief Financial Officer and Treasurer, to Don Lee Farms’ existing fraud claims alleging that those individuals were involved in the alleged fraudulent misrepresentations. On June 23, 2020, the judge denied Beyond Meat and the individual defendants’ motion to dismiss the fraud and negligent misrepresentation claims, allowing the claims to proceed. On July 6, 2020, the Company and the individual defendants filed an answer denying all of Don Lee Farms’ claims, including denying all allegations of fraud and negligent misrepresentation.
On August 11, 2020, the Company filed an amended cross-complaint against Don Lee Farms, its parent Goodman Food Products, Inc. and its owners and employees, Donald, Daniel, and Brandon Goodman. Among other claims, the amended cross-complaint alleges that Don Lee Farms defrauded Beyond Meat, misappropriated its trade secrets, and infringed its trademarks.
On January 28, 2021, Don Lee Farms filed a motion for summary adjudication on its breach of contract and money owed claims and on Beyond Meat’s breach of contract claims. On February 18, 2021, Don Lee Farms and Donald, Daniel and Brandon Goodman filed a motion for summary adjudication on Beyond Meat’s fraud, negligent misrepresentation, and conversion claims.
On February 16, 2021, the Court entered an order consolidating this action with an action that Don Lee Farms filed against CLW Foods, LLC, a current Beyond Meat contract manufacturer. On February 22, 2021, CLW Foods, LLC requested a continuance of the trial date, which the Court granted.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
On March 19, 2021, Don Lee Farms requested the dismissal, without prejudice, of Don Lee Farm’s claims against the Company’s former contract manufacturer, ProPortion Foods, LLC and current contract manufacturer CLW Foods, LLC. On, March 23, 2021, ProPortion Foods, LLC requested that its claims against the Company be dismissed without prejudice. On March 26, 2021, the Court granted Don Lee Farms’ request to dismiss its claims against ProPortion Foods, LLC and CLW Foods, LLC; and granted ProPortion Foods, LLC request to dismiss its claims against the Company.
On May 7, 2021, the Court ruled on Don Lee Farms’ motions for summary adjudication. The Court granted Don Lee Farms’ motion for summary adjudication on its breach of contract and money owed claims, and Beyond Meat’s negligent misrepresentation and conversion claims. The Court denied Don Lee Farms’ motion for summary adjudication on Beyond Meat’s breach of contract and fraud claims, allowing Beyond Meat’s claims to proceed to trial.
On June 11, 2021, former Beyond Meat employees Mark Nelson and Tony Miller, and current employee, Jessica Quetsch (collectively, the “individual defendants”), filed a motion for summary judgment on DLF’s fraud claim asserted against them. The individual defendants’ summary judgment hearing is currently scheduled for August 25, 2021. On June 11, 2021, the Company filed a motion for summary adjudication on DLF’s fraud and negligent misrepresentation claims, misappropriation of trade secret claim, and unfair competition claim under the California Business and Professions Code. The Company’s summary adjudication hearing is currently scheduled for August 27, 2021.
The previous trial date, June 14, 2021, was continued. Trial is currently set for September 27, 2021.
Don Lee Farms is seeking from Beyond Meat and the individual defendants unspecified compensatory and punitive damages, declaratory and injunctive relief, including the prohibition of Beyond Meat’s use or disclosure of the alleged trade secrets, and attorneys’ fees and costs. The Company is seeking from Don Lee Farms monetary damages, restitution of monies paid to Don Lee Farms, injunctive relief, including the prohibition of Don Lee Farms’ use or disclosure of Beyond Meat’s trade secrets and the prohibition of Don Lee Farms’ infringing use of Beyond Meat’s trademarks, and attorneys’ fees and costs.
The Company believes it was justified in terminating the supply agreement with Don Lee Farms, that the Company did not misappropriate Don Lee Farms’ alleged trade secrets, that the Company is not liable for the fraud or negligent misrepresentation alleged in the third amended complaint, and that Don Lee Farms is liable for the conduct alleged in the Company’s amended cross-complaint. Conversely, as alleged in the Company’s amended cross-complaint, the Company believes Don Lee Farms misappropriated the Company’s trade secrets, defrauded the Company, and ultimately has infringed the Company’s trademarks.
The Company is currently in the process of litigating this matter and intends to vigorously defend itself and its current and former employees against the claims and to prosecute the Company’s own claims. The Company cannot assure you that Don Lee Farms will not prevail in all or some of their claims against the Company or the individual defendants, or that the Company will prevail in some or all of its claims against Don Lee Farms. For example, if Don Lee Farms succeeds in the lawsuit, the Company could be required to pay damages, including but not limited to contract damages reasonably calculated at what the Company would have paid Don Lee Farms to produce the Company’s products through 2019, the end of the contract term, and Don Lee Farms could also claim some ownership in the intellectual property associated with the production of certain of the Company’s products or in the products themselves, and thus claim a stake in the value the Company has derived and will derive from the use of that intellectual property after the Company terminated its supply agreement with Don Lee Farms. Based on the Company’s current knowledge, the Company has determined that the amount of any material loss or range of any losses that is reasonably possible to result from this lawsuit is not estimable.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
Securities Related Litigation
On January 30, 2020, Larry Tran, a purported shareholder of Beyond Meat, filed a putative securities class action lawsuit in the United States District Court for the Central District of California against Beyond Meat and two of the Company’s executive officers, the Company’s President and CEO, Ethan Brown, and the Company’s former Chief Financial Officer and Treasurer, Mark Nelson. As noted in previous filings, the Tran securities class action was dismissed with prejudice on October 27, 2020, except for the class allegations of absent putative class members, which were dismissed without prejudice.
On March 16, 2020, Eric Weiner, a purported shareholder of Beyond Meat, filed a shareholder derivative lawsuit in the United States District Court for the Central District of California, putatively on behalf of the Company, against two of the Company’s executive officers, the Company’s President and CEO, Ethan Brown, and the Company’s former Chief Financial Officer and Treasurer, Mark Nelson, and each of the Company’s directors, including one former director, who signed the Company’s initial public offering registration statement. The lawsuit asserts claims under Sections 10(b) and 21D of the Exchange Act, claims of breaches of fiduciary duty as directors and/or officers of Beyond Meat, and claims of unjust enrichment and waste of corporate assets, all relating to the Company’s ongoing litigation with Don Lee Farms, related actions taken by Beyond Meat and the named individuals during the period of May 2, 2019 to March 16, 2020, and the Tran securities case brought against the Company.
On March 18, 2020, Kimberly Brink and Melvyn Klein, purported shareholders of Beyond Meat, filed a shareholder derivative lawsuit in the United States District Court for the Central District of California, putatively on behalf of the Company, against two of the Company’s executive officers, the Company’s President and CEO, Ethan Brown, and the Company’s former Chief Financial Officer and Treasurer, Mark Nelson, and each of the Company’s directors, including one former director, who signed the Company’s initial public offering registration statement. The lawsuit asserts claims under Sections 10(b) and 21D of the Exchange Act, claims of breaches of fiduciary duty as directors and/or officers of Beyond Meat, and claims of unjust enrichment and waste of corporate assets, all relating to the Company’s ongoing litigation with Don Lee Farms, related actions taken by Beyond Meat and the named individuals during the period of May 2, 2019 to March 18, 2020, and the Tran securities case brought against the Company.
On April 1, 2020, the United States District Court for the Central District of California entered an order consolidating the Weiner action and the Brink action for all purposes and designated the consolidated case In re: Beyond Meat, Inc. Derivative Litigation (the “California Derivative Action”). On April 13, 2020, the Court entered an order appointing co-lead counsel for the California Derivative Action. On June 23, 2020, the Court entered an order approving a Joint Stipulation Regarding Stay of Actions. Under the terms of the stay approval order, all proceedings in the California Derivative Action are stayed until (1) the Tran securities class action is dismissed, with prejudice, and all appeals related thereto have been exhausted; or (2) any motion to dismiss the Tran securities class action is denied in whole or in part. On April 20, 2021, the parties filed a joint stipulation regarding briefing schedule, and the Court entered a schedule on April 21, 2021.
On May 24, 2021, the plaintiffs in the California Derivative Action filed a First Amended Complaint (“FAC”). The FAC names the same defendants named in the originally-filed consolidated complaint and adds four additional defendants, including ProPortion Foods, LLC (“ProPortion”) and CLW Foods, LLC (“CLW”). The FAC asserts claims under Section 14(a) of the Exchange Act, claims of breach of fiduciary duty, unjust enrichment, waste of corporate assets, abuse of control and gross mismanagement against the individual defendants, and aiding and abetting claims against CLW and ProPortion. All of these claims relate to the Company’s dealings and ongoing litigation with Don Lee Farms, and related actions taken by Beyond Meat and the named individuals during the period of April 2016 to the present. On July 2, 2021, the Court entered a Joint Stipulation Regarding Extension of Briefing Schedule so that the parties may attempt to reach resolution of the lawsuit. A status report is due to the Court on October 1, 2021, and defendants’ responsive pleading to the FAC is due by October 15, 2021. Defendants believe the claims are without merit and intend to vigorously defend all claims asserted. The Company is unable to estimate potential losses, if any, related to this lawsuit.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
On May 27, 2020, Kevin Chew, a purported shareholder of Beyond Meat, filed a shareholder derivative lawsuit in the United States District Court of the District of Delaware, putatively on behalf of the Company, against two of the Company’s executive officers, the Company’s President and CEO, Ethan Brown, and the Company’s former Chief Financial Officer and Treasurer, Mark Nelson, and each of the Company’s directors, including one former director, who signed the Company’s initial public offering registration statement. The lawsuit asserts claims under Sections 10(b) and 21D of the Exchange Act and claims of breaches of fiduciary duty, relating to the Company’s ongoing litigation with Don Lee Farms, related actions taken by Beyond Meat and the named individuals during the period of May 2, 2019 to May 27, 2020. On June 16, 2020, the Court entered an order staying all proceedings in the derivative action until (1) the Tran securities class action is dismissed, with prejudice, and all appeals related thereto have been exhausted; or (2) any motion to dismiss the Tran securities class action is denied in whole or in part. On June 17, 2020, the Court entered an order administratively closing the derivative case based on the stay order. On July 29, 2021, the Court entered a Joint Stipulation to Continue the Stay of the Action, staying the case until the resolution of the California Derivative Action. Defendants believe the claims are without merit and intend to vigorously defend all claims asserted. The Company is unable to estimate potential losses, if any, related to this lawsuit.
On June 17, 2020, James Janolek, a purported shareholder of Beyond Meat, filed a shareholder derivative lawsuit in the United States District Court of the District of Delaware, putatively on behalf of the Company, against two of the Company’s executive officers, the Company’s President and CEO, Ethan Brown, and the Company’s former Chief Financial Officer and Treasurer, Mark Nelson, and each of the Company’s directors, including one former director, who signed the Company’s initial public offering registration statement. The lawsuit asserts claims under Sections 14(a) and 20(a) of the Exchange Act, claims of breaches of fiduciary duty as directors and/or officers of Beyond Meat, and claims of unjust enrichment and waste of corporate assets, all relating to the Company’s ongoing litigation with Don Lee Farms, related actions taken by Beyond Meat and the named individuals during the period of May 2, 2019 to June 17, 2020. On July 10, 2020, the Court entered an order staying all proceedings in the derivative action until (1) the Tran securities class action is dismissed, with prejudice, and all appeals related thereto have been exhausted; or (2) any motion to dismiss the Tran securities class action is denied in whole or in part. On July 10, 2020, the Court entered an order administratively closing the derivative case based on the stay order. On November 9, 2020, Plaintiff filed a Notice of Voluntary Dismissal without prejudice and without costs or attorney fees to either party.
The Company is involved in various other legal proceedings, claims, and litigation arising in the ordinary course of business. Based on the facts currently available, the Company does not believe that the disposition of such matters that are pending or asserted will have a material effect on its financial statements.
Note 11. Income Taxes
For the three months ended July 3, 2021 and June 27, 2020, the Company recorded $2,000 and $16,000, respectively, in income tax expense in its condensed consolidated statements of operations. For the six months ended July 3, 2021 and June 27, 2020, the Company recorded $50,000 and $15,000, respectively, in income tax expense in its condensed consolidated statements of operations.
The Company has evaluated the available evidence supporting the realization of its deferred tax assets, including the amount and timing of future taxable income, and has determined that it is more likely than not that its net deferred tax assets will not be realized in the U.S. Due to uncertainties surrounding the realization of the deferred tax assets, the Company maintains a full valuation allowance against substantially all deferred tax assets. If the Company determines that it will be able to realize some portion or all of its deferred tax assets, an adjustment to its valuation allowance on its deferred tax assets will be made and the adjustment would have the effect of increasing net income in the period such determination is made.
As of July 3, 2021, the Company did not have any accrued interest or penalties related to uncertain tax positions. The Company’s policy is to recognize interest and penalties related to uncertain tax
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
positions in income tax expense. The Company is subject to U.S. federal tax authority and U.S. state tax authority examinations for all years with respect to net operating loss and credit carryforwards.
In response to the COVID-19 pandemic, the United States passed the Coronavirus Aid, Relief, and Economic Security ("CARES") Act in March 2020 and on March 11, 2021 the United States enacted the American Rescue Plan Act of 2021. These Acts include various income and payroll tax measures. The income tax and payroll tax measures did not materially impact the Company’s financial statements.
Note 12. Net Loss Per Share Available to Common Stockholders
The Company calculates basic and diluted net loss per share available to common stockholders in conformity with the two-class method required for companies with participating securities. Pursuant to ASU 2020-06, the Company applies the more dilutive of the if-converted method and the two-class method to its Notes.
Computation of net loss per share available to common stockholders for the three and six months ended July 3, 2021 excludes the dilutive effect of 3,892,262 shares issuable under stock options and 303,392 RSUs outstanding at July 3, 2021 because the Company incurred a net loss and their inclusion would be anti-dilutive. Computation of net loss per share available to common stockholders for the three and six months ended July 3, 2021 also excludes adjustments under the two-class method relating to a liability classified, share-settled obligation to an executive officer to deliver a variable number of shares based on a fixed monetary amount (see Note 9) because the shares to be delivered are not participating securities as they do not have voting rights and are not entitled to participate in dividends until they are issued. Computation of net loss per share available to common stockholders for the three and six months ended July 3, 2021 also excludes the dilutive effect of the Notes because the Company recorded a net loss and their inclusion would be anti-dilutive. Computation of net loss per share available to common stockholders for the three and six months ended June 27, 2020 excludes the dilutive effect of 4,562,663 option shares and 287,439 RSUs because their inclusion would be anti-dilutive. Computation of net loss per share available to common stockholders for the three and six months ended June 27, 2020 also excludes adjustments under the two-class method relating to a liability classified, share-settled obligation to an executive officer to deliver a variable number of shares based on a fixed monetary amount (see Note 9) because the shares to be delivered are not participating securities as they do not have voting rights and are not entitled to participate in dividends until they are issued.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
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(in thousands, except share and per share amounts)
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Three Months Ended
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Six Months Ended
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July 3,
2021
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June 27,
2020
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July 3,
2021
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June 27,
2020
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Numerator:
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Net loss available to common stockholders
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$
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(19,652)
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$
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(10,205)
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$
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(46,918)
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$
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(8,390)
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Undistributed net income available to unvested restricted stockholders
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—
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—
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—
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—
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Net loss available to common stockholders—basic
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(19,652)
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(10,205)
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(46,918)
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(8,390)
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Denominator:
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Weighted average common shares outstanding—basic
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63,121,400
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62,098,861
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63,029,597
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61,904,360
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Dilutive effect of shares issuable under stock options
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—
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—
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—
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—
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Dilutive effect of RSUs
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—
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—
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—
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—
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Dilutive effect of share-settled obligation
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—
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—
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—
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—
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Dilutive effect of Notes, if converted(1)
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—
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—
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—
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—
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Weighted average common shares outstanding—diluted
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63,121,400
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62,098,861
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63,029,597
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61,904,360
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Net loss per share available to common stockholders—basic
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$
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(0.31)
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$
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(0.16)
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$
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(0.74)
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$
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(0.14)
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Net loss per share available to common stockholders—diluted
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$
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(0.31)
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$
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(0.16)
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$
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(0.74)
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$
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(0.14)
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__________
(1) As the Company recorded net losses in the three and six months ended July 3, 2021, inclusion of shares from the conversion premium or spread would be anti-dilutive. The Company had no Notes outstanding during the three and six months ended June 27, 2020.
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
Note 13. Subsequent Event
Subsequent to the quarter ended July 3, 2021, on July 15, 2021, the Company purchased 12.9 acres of real property in Columbia, Missouri containing approximately 142,317 square feet of office/warehouse space, from where the Company had been conducting warehousing activities under a lease, for cash consideration of $10.4 million, subject to adjustment for customary prorations, transfer taxes, escrow holdbacks and other adjustments. Transaction costs were not material. The Company has not completed its evaluation of the accounting for this transaction.