UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended April 1, 2023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to
Commission File Number: 001-38879
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
(Address, including zip code, of principal executive offices)
(866 ) 756-4112
(Registrant’s telephone number, including area code)
119 Standard Street
El Segundo, CA 90245
(Former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☒ | Accelerated filer | ☐ | |||||||||||||||
Non-accelerated filer | ☐ | Smaller reporting company | |||||||||||||||
| Emerging growth company | |||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of May 9, 2023, the registrant had 64,226,710 shares of common stock, $0.0001 par value per share, outstanding.
TABLE OF CONTENTS | |||||
Page | |||||
i
Note Regarding Forward-Looking Statements
This report includes forward-looking statements within the meaning of the federal securities laws that involve risks and uncertainties concerning the business, products and financial results of Beyond Meat, Inc. (including its subsidiaries unless the context otherwise requires, “Beyond Meat,” “we,” “us,” “our” or the “Company”). We have based these forward-looking statements largely on our current opinions, expectations, beliefs, plans, objectives, assumptions and projections about future events and financial trends affecting the operating results and financial condition of our business. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to:
•the impact of inflation and rising interest rates across the economy, including higher food, grocery, raw materials, transportation, energy, labor and fuel costs;
•the impact of adverse and uncertain economic and political conditions in the U.S. and international markets, including due to an economic recession, downturn or periods of rising or high inflation;
•reduced consumer confidence and changes in consumer spending, including spending to purchase our products, and negative trends in consumer purchasing patterns due to levels of consumers’ disposable income, credit availability and debt levels, and economic conditions, including due to recessionary and inflationary pressures;
•factors negatively impacting demand in the plant-based meat category;
•our ability to accurately predict consumer taste preferences, trends and demand and successfully innovate, introduce and commercialize new products and improve existing products, including in new geographic markets;
•the effects of increased competition from our market competitors and new market entrants;
•risks and uncertainties related to certain cost-reduction initiatives, workforce reductions, executive leadership changes, and the timing and success of achieving certain financial goals or cash flow positive targets;
•our ability to streamline operations and improve cost efficiencies, which could result in the contraction of our business and the implementation of significant cost cutting measures such as downsizing and exiting certain operations, domestically and/or abroad;
•the impact of uncertainty as a result of doing business in China and Europe;
•the volatility of or inability to access the capital markets, including due to macroeconomic factors, geopolitical tensions or the outbreak of hostilities or war;
•changes in the retail landscape, including the timing and level of trade and promotion discounts, our ability to maintain and grow market share and increase household penetration, repeat purchases, buying rates (amount spent per buyer) and purchase frequency, and our ability to maintain and increase sales velocity of our products;
•changes in the foodservice landscape, including the timing and level of marketing and other financial incentives to assist in the promotion of our products, our ability to maintain and grow market share and attract and retain new foodservice customers or retain existing foodservice customers, and our ability to introduce and sustain offering of our products on menus;
•the timing and success of distribution expansion and new product introductions in increasing revenues and market share;
•the timing and success of strategic Quick Service Restaurant (“QSR”) partnership launches and limited time offerings resulting in permanent menu items;
ii
•foreign exchange rate fluctuations;
•our ability to identify and execute cost-down initiatives intended to achieve price parity with animal protein;
•the effectiveness of our business systems and processes;
•our estimates of the size of our market opportunities and ability to accurately forecast market growth;
•the impact of uncertainty in our domestic and international supply chain, including labor shortages and disruption, shipping delays and disruption, and the impact of cyber incidents at suppliers and vendors;
•our ability to effectively expand or optimize our manufacturing and production capacity, including effectively managing capacity for specific products with shifts in demand;
•risks associated with underutilization of capacity which could give rise to increased costs, underutilization fees and termination fees to exit certain supply chain arrangements and/or the write-off of certain equipment;
•our inability to sell our inventory in a timely manner requiring us to sell our products through liquidation channels at lower prices, write-down or write-off obsolete inventory, or increase inventory reserves;
•our ability to accurately forecast our future results of operations and financial goals or targets, including fluctuations in demand for our products and in the plant-based meat category generally and increased competition;
•our ability to accurately forecast demand for our products and manage our inventory, including the impact of customer orders ahead of holidays and shelf reset activities, customer and distributor changes and buying patterns, such as reductions in targeted inventory levels, and supply chain and labor disruptions, including due to the impact of cyber incidents at suppliers and vendors;
•our operational effectiveness and ability to fulfill orders in full and on time;
•variations in product selling prices and costs, and the mix of products sold;
•our ability to successfully enter new geographic markets, manage our international expansion and comply with any applicable laws and regulations, including risks associated with doing business in foreign countries, substantial investments in our manufacturing operations in China and the Netherlands, and our ability to comply with the U.S. Foreign Corrupt Practices Act (“FCPA”) or other anti-corruption laws;
•the effects of global outbreaks of pandemics (such as the COVID-19 pandemic), epidemics or other public health crises, or fear of such crises;
•the success of our marketing initiatives and the ability to maintain and grow brand awareness, maintain, protect and enhance our brand, attract and retain new customers and maintain and grow our market share;
•our ability to attract, maintain and effectively expand our relationships with key strategic foodservice partners;
•our ability to attract and retain our suppliers, distributors, co-manufacturers and customers;
•our ability to procure sufficient high-quality raw materials at competitive prices to manufacture our products;
•the availability of pea and other proteins that meet our standards;
•our ability to diversify the protein sources used for our products;
•our ability to differentiate and continuously create innovative products, respond to competitive innovation and achieve speed-to-market;
•our ability to successfully execute our strategic initiatives;
iii
•the volatility associated with ingredient, packaging, transportation and other input costs;
•real or perceived quality or health issues with our products or other issues that adversely affect our brand and reputation;
•our ability to accurately predict consumer taste preferences, trends and demand and successfully innovate, introduce and commercialize new products and improve existing products, including in new geographic markets;
•significant disruption in, or breach in security of our or our suppliers’ or vendors’ information technology systems, and resultant interruptions in service and any related impact on our reputation, including data privacy, and any potential impact on our supply chain, including on customer demand, order fulfillment and lost sales, and the resulting timing and/or amount of net revenues recognized;
•the ability of our transportation providers to ship and deliver our products in a timely and cost effective manner;
•senior management and key personnel changes, the attraction, training and retention of qualified employees and key personnel and our ability to maintain our company culture;
•the effects of organizational changes including reductions-in-force and realignment of reporting structures;
•the success of operations conducted by joint ventures where we share ownership and management of a company with one or more parties who may not have the same goals, strategies or priorities as we do and where we do not receive all of the financial benefit;
•the timing, impact and success of restructuring certain contracts and operating activities related to Beyond Meat Jerky and our assumption of distribution responsibilities for Beyond Meat Jerky;
•risks related to use of a professional employer organization to administer human resources, payroll and employee benefits functions for certain of our international employees, and use of certain third party service providers for the performance of several business operations including payroll and human capital management services;
•the impact of potential workplace hazards;
•the effects of natural or man-made catastrophic or severe weather events, including events brought on by climate change, particularly involving our or any of our co-manufacturers’ manufacturing facilities, our suppliers’ facilities, or any other vital aspects of our supply chain;
•the impact of marketing campaigns aimed at generating negative publicity regarding our products, brand and the plant-based meat category;
•the effectiveness of our internal controls;
•accounting estimates based on judgment and assumptions that may differ from actual results;
•the requirements of being a public company and effects of increased administrative costs related to compliance and reporting obligations;
•the sufficiency of our cash and cash equivalents to meet our liquidity needs, including risks associated with adverse developments affecting the financial services industry;
•our significant indebtedness and ability to repay such indebtedness;
•risks related to our debt, including limitations on our cash flow from operations and our ability to satisfy our obligations under the convertible senior notes; our ability to raise the funds necessary to repurchase the convertible senior notes for cash, under certain circumstances, or to pay any cash amounts due upon conversion; provisions in the indenture governing the convertible senior notes delaying or preventing an otherwise beneficial takeover of us; and any adverse impact on our reported financial condition and results from the accounting methods for the convertible senior notes;
•estimates of our expenses, future revenues, capital expenditures, capital requirements and our needs for additional financing;
iv
•our ability to meet our obligations under our El Segundo Campus and Innovation Center ("Campus Headquarters") lease (“Campus Lease”), the timing of occupancy and completion of the build-out of our space, cost overruns, delays, workforce reductions or other cost-reduction initiatives on our space demands;
•our ability to meet our obligations under leases for our corporate offices, manufacturing facilities and warehouses, or risks related to excess space capacity under our leases due to workforce reductions or other cost-reduction initiatives;
•changes in laws and government regulation affecting our business, including the U.S. Food and Drug Administration (“FDA”) and the U.S. Federal Trade Commission (“FTC”) governmental regulation, and state, local and foreign regulation;
•new or pending legislation, or changes in laws, regulations or policies of governmental agencies or regulators, both in the U.S. and abroad, affecting plant-based meat, the labeling or naming of our products, or our brand name or logo;
•the failure of acquisitions and other investments to be efficiently integrated and produce the results we anticipate;
•risks inherent in investment in real estate;
•the financial condition of, and our relationships with our suppliers, co-manufacturers, distributors, retailers, and foodservice customers, and their future decisions regarding their relationships with us;
•our ability and the ability of our suppliers and co-manufacturers to comply with food safety, environmental or other laws or regulations;
•seasonality, including increased levels of purchasing by customers ahead of holidays, customer shelf reset activity and the timing of product restocking by our retail customers;
•economic conditions and the impact on consumer spending;
•the impact of increased scrutiny from a variety of stakeholders, institutional investors and governmental bodies on environmental, social and governance (“ESG”) practices, including expanding mandatory and voluntary reporting, diligence and disclosure on ESG matters;
•the outcomes of legal or administrative proceedings, or new legal or administrative proceedings filed against us;
•our, our suppliers’ and our co-manufacturers’ ability to protect our proprietary technology, intellectual property and trade secrets adequately;
•the impact of tariffs and trade wars;
•the impact of changes in tax laws; and
•the risks discussed in Part I, Item 1A, “Risk Factors,” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the Securities and Exchange Commission (the “SEC”) on March 1, 2023 (the “2022 10-K”), Part II, Item 1A, “Risk Factors,” included herein, and those discussed in other documents we file from time to time with the SEC.
In some cases, you can identify forward-looking statements by terms such as “may,” “should,” “expects,” “might,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” “seek,” “would” or “continue,” or the negative of these terms or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future
v
events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements.
This report also contains estimates and other statistical data obtained from independent parties and by us relating to market size and growth and other data about our industry and ultimate consumers. The number of retail and foodservice outlets where Beyond Meat branded products are available was derived from data as of March 2023. This data involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates and data.
All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth above. Forward-looking statements speak only as of the date of this report. You should not put undue reliance on any forward-looking statements. We assume no obligation to publicly update or revise any forward-looking statements because of new information, future events, changes in assumptions or otherwise, except to the extent required by applicable laws. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.
“Beyond Meat,” “Beyond Burger,” “Beyond Beef,” “Beyond Sausage,” “Beyond Breakfast Sausage,” “Beyond Meatballs,” “Beyond Chicken,” “Beyond Popcorn Chicken,” “Beyond Steak,” “Go Beyond,” the Caped Steer Logo and “Eat What You Love” are registered or pending trademarks of Beyond Meat, Inc. in the United States and, in some cases, in certain other countries. All other brand names or trademarks appearing in this report are the property of their respective holders. Solely for convenience, the trademarks and trade names contained herein are referred to without the ® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.
vi
Part I. Financial Information
ITEM I. FINANCIAL STATEMENTS
| BEYOND MEAT, INC. AND SUBSIDIARIES | |||||||||||
| Condensed Consolidated Balance Sheets | |||||||||||
| (In thousands, except share and per share data) | |||||||||||
| (unaudited) | |||||||||||
| April 1, 2023 | December 31, 2022 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash, current | |||||||||||
| Accounts receivable, net | |||||||||||
| Inventory | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Assets held for sale | |||||||||||
| Total current assets | $ | $ | |||||||||
| Restricted cash, non-current | |||||||||||
| Property, plant, and equipment, net | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Prepaid lease costs, non-current | |||||||||||
| Other non-current assets, net | |||||||||||
| Investment in unconsolidated joint venture | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and stockholders’ (deficit) equity: | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Current portion of operating lease liabilities | |||||||||||
| Accrued expenses and other current liabilities | |||||||||||
| Total current liabilities | $ | $ | |||||||||
| Long-term liabilities: | |||||||||||
| Convertible senior notes, net | $ | $ | |||||||||
| Operating lease liabilities, net of current portion | |||||||||||
| Finance lease obligations and other long-term liabilities | |||||||||||
| Total long-term liabilities | $ | $ | |||||||||
| (continued on the next page) | |||||||||||
1
| BEYOND MEAT, INC. AND SUBSIDIARIES | |||||||||||
| Condensed Consolidated Balance Sheets | |||||||||||
| (In thousands, except share and per share data) | |||||||||||
| (unaudited) | |||||||||||
| April 1, 2023 | December 31, 2022 | ||||||||||
| Commitments and Contingencies (Note 10) | |||||||||||
| Stockholders’ (deficit) equity: | |||||||||||
Preferred stock, par value $ | $ | $ | |||||||||
Common stock, par value $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total stockholders’ deficit | $ | ( | $ | ( | |||||||
| Total liabilities and stockholders’ (deficit) equity | $ | $ | |||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
BEYOND MEAT, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(In thousands, except share and per share data)
(unaudited)
| Three Months Ended | ||||||||||||||
| April 1, 2023 | April 2, 2022 | |||||||||||||
| Net revenues | $ | $ | ||||||||||||
| Cost of goods sold | ||||||||||||||
| Gross profit | ||||||||||||||
| Research and development expenses | ||||||||||||||
Selling, general and administrative expenses | ||||||||||||||
| Restructuring expenses | ( | |||||||||||||
| Total operating expenses | ||||||||||||||
| Loss from operations | ( | ( | ||||||||||||
| Other (expense) income, net: | ||||||||||||||
| Interest expense | ( | ( | ||||||||||||
| Other, net | ( | |||||||||||||
| Total other income (expense), net | ( | |||||||||||||
| Loss before taxes | ( | ( | ||||||||||||
| Income tax expense | ||||||||||||||
| Equity in losses of unconsolidated joint venture | ||||||||||||||
| Net loss | $ | ( | $ | ( | ||||||||||
| Net loss per share available to common stockholders—basic and diluted | $ | ( | $ | ( | ||||||||||
| Weighted average common shares outstanding—basic and diluted | ||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
BEYOND MEAT, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Loss
(In thousands)
(unaudited)
| Three Months Ended | ||||||||||||||
| April 1, 2023 | April 2, 2022 | |||||||||||||
| Net loss | $ | ( | $ | ( | ||||||||||
| Other comprehensive loss, net of tax: | ||||||||||||||
| Foreign currency translation gain (loss), net of tax | ( | |||||||||||||
| Comprehensive loss, net of tax | $ | ( | $ | ( | ||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
BEYOND MEAT, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders’ (Deficit) Equity
(In thousands, except share data)
(unaudited)
| Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total | ||||||||||||||||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||
| Issuance of common stock under equity incentive plans, net | — | — | — | |||||||||||||||||||||||||||||||||||
| Share-based compensation for equity classified awards | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||
| Balance at April 2, 2022 | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total | ||||||||||||||||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||
| Issuance of common stock under equity incentive plans, net | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||
| Share-based compensation for equity classified awards | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Balance at April 1, 2023 | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
BEYOND MEAT, INC. AND SUBSIDIARIES | ||||||||||||||
Condensed Consolidated Statements of Cash Flows | ||||||||||||||
| (In thousands) | ||||||||||||||
| (unaudited) | ||||||||||||||
| Three Months Ended | ||||||||||||||
| April 1, 2023 | April 2, 2022 | |||||||||||||
| Cash flows from operating activities: | ||||||||||||||
| Net loss | $ | ( | $ | ( | ||||||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||
| Depreciation and amortization | ||||||||||||||
| Non-cash lease expense | ||||||||||||||
| Share-based compensation expense | ||||||||||||||
| Loss on sale of fixed assets | ||||||||||||||
| Amortization of debt issuance costs | ||||||||||||||
| Equity in losses of unconsolidated joint venture | ||||||||||||||
| Unrealized gain on foreign currency transactions | ( | |||||||||||||
| Net change in operating assets and liabilities: | ||||||||||||||
| Accounts receivable | ( | ( | ||||||||||||
| Inventories | ( | |||||||||||||
| Prepaid expenses and other assets | ( | |||||||||||||
| Accounts payable | ( | ( | ||||||||||||
| Accrued expenses and other current liabilities | ( | |||||||||||||
| Prepaid lease costs, non-current | ( | ( | ||||||||||||
| Operating lease liabilities | ( | ( | ||||||||||||
| Net cash used in operating activities | $ | ( | $ | ( | ||||||||||
| Cash flows from investing activities: | ||||||||||||||
| Purchases of property, plant and equipment | $ | ( | $ | ( | ||||||||||
| Proceeds from sale of fixed assets | ||||||||||||||
| Payments for investment in joint venture | ( | |||||||||||||
| Return of security deposits | ||||||||||||||
| Net cash used in investing activities | $ | ( | $ | ( | ||||||||||
| Cash flows from financing activities: | ||||||||||||||
| Principal payments under finance lease obligations | $ | ( | $ | ( | ||||||||||
| Proceeds from exercise of stock options | ||||||||||||||
| Payments of minimum withholding taxes on net share settlement of equity awards | ( | ( | ||||||||||||
| Net cash (used in) provided by financing activities | $ | ( | $ | |||||||||||
| Net decrease in cash, cash equivalents and restricted cash | $ | ( | $ | ( | ||||||||||
| Effect of exchange rate changes on cash | ( | |||||||||||||
| Cash, cash equivalents and restricted cash at the beginning of the period | ||||||||||||||
| Cash, cash equivalents and restricted cash at the end of the period | $ | $ | ||||||||||||
| (continued on the next page) | ||||||||||||||
6
BEYOND MEAT, INC. AND SUBSIDIARIES | ||||||||||||||
Condensed Consolidated Statements of Cash Flows | ||||||||||||||
| (In thousands) | ||||||||||||||
| (unaudited) | ||||||||||||||
| Three Months Ended | ||||||||||||||
| April 1, 2023 | April 2, 2022 | |||||||||||||
| Supplemental disclosures of cash flow information: | ||||||||||||||
| Cash paid during the period for: | ||||||||||||||
| Interest | $ | $ | ||||||||||||
| Taxes | $ | $ | ||||||||||||
Non-cash investing and financing activities: | ||||||||||||||
Non-cash additions to property, plant and equipment | $ | $ | ||||||||||||
| Reclassification of pre-paid lease costs to operating lease right-of-use assets | $ | $ | ||||||||||||
| Non-cash additions to financing leases | $ | $ | ||||||||||||
(concluded) | ||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7
BEYOND MEAT, INC. AND SUBSIDIARIES
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 a leading plant-based meat company 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 promise, “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.
As of April 1, 2023, approximately 83 % 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, 2021 and, to a lesser extent, 2022 and the first quarter of 2023. 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 (including any resurgences), the impact of variants of the virus that causes COVID-19, the wide distribution and public acceptance of COVID-19 vaccines, labor needs at the Company as well as in the supply chain and at customers, compliance with government or employer COVID-19 vaccine mandates and the resulting impact on available labor, 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. 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. 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
A detailed description of the Company's significant accounting policies can be found in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 1, 2023 (the “2022 10-K”). There have been no material changes in the Company’s significant accounting policies from those that were disclosed in the 2022 10-K, except as noted below.
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
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BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
Foreign Currency
Foreign currency translation gains (losses), net of tax, reported as cumulative translation adjustments through “Other comprehensive loss” were $3,000 and $(0.7 ) million for the three months ended April 1, 2023 and April 2, 2022, respectively. Net realized and unrealized foreign currency transaction gains (losses) included in “Other, net” were $0.3 million and $(1.1 ) million during the three months ended April 1, 2023 and April 2, 2022, respectively.
Fair Value of Financial Instruments
The Company had no financial instruments measured at fair value on a recurring basis as of April 1, 2023 and December 31, 2022.
There were no transfers of financial assets or liabilities into or out of Level 1, Level 2 or Level 3 for the three months ended April 1, 2023.
9
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
sheet and $2.4 million to secure a letter of credit associated with a new third party contract manufacturer in Europe recorded in “Restricted cash, current” in the condensed consolidated balance sheet.
Presentation of Net Revenues by Channel
The following table presents the Company’s net revenues by channel:
| Three Months Ended | ||||||||||||||
| (in thousands) | April 1, 2023 | April 2, 2022 | ||||||||||||
| U.S.: | ||||||||||||||
| Retail | $ | $ | ||||||||||||
| Foodservice | ||||||||||||||
| U.S. net revenues | ||||||||||||||
| International: | ||||||||||||||
| Retail | ||||||||||||||
| Foodservice | ||||||||||||||
| International net revenues | ||||||||||||||
| Net revenues | $ | $ | ||||||||||||
One distributor accounted for approximately 12 % of the Company’s gross revenues in the three months ended April 1, 2023; and one customer and one distributor accounted for approximately 12 % and 10 % of the Company’s gross revenues, respectively, in the three months ended April 2, 2022. No other customer or distributor accounted for more than 10% of the Company’s gross revenues in the three months ended April 1, 2023 and April 2, 2022.
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 “Investment in unconsolidated joint venture” in the Company’s condensed consolidated balance sheets. The Company recognizes its portion of the investee’s results in “Equity in losses of unconsolidated joint venture” in its condensed consolidated statements of operations. The Company eliminates its proportionate interest in any intra-entity profits or losses in the inventory of the investee at the end of the reporting period and recognizes its portion of the profit and losses when realized by the investee.
Shipping and Handling Costs
Outbound shipping and handling costs included in selling, general and administrative (“SG&A”) expenses in the three months ended April 1, 2023 and April 2, 2022 were $3.2 million and $5.9 million, respectively.
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BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
Change in Accounting Estimate
During the first quarter of 2023, the Company completed a reassessment of the useful lives of its large manufacturing equipment and research and development equipment, and determined that the Company should increase the estimated useful lives for certain of its equipment from a range of 5 to 10 years to a uniform 10 years. This reassessment was accounted for as a change in accounting estimate and was made on a prospective basis effective January 1, 2023. See Note 6.
Recently Adopted Accounting Pronouncements
None.
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 May 23, 2017, the Company notified the co-manufacturer of its decision to terminate the Agreement. On October 18, 2022, the parties to this dispute entered into a confidential written settlement agreement and mutual release, pursuant to which the parties agreed to dismiss with prejudice all claims and cross-claims asserted in the associated cases filed in the Superior Court of the State of California for the County of Los Angeles and the United States District Court for the Central District of California. The terms of the settlement did not have a material impact on Beyond Meat’s financial position or results of operations. No party admitted liability or wrongdoing in connection with the settlement.
In the three months ended April 1, 2023, the Company recorded a credit of $(0.4 ) million in restructuring expenses primarily driven by a reversal of certain accruals. In the three months ended April 2, 2022, the Company recorded $3.0 million in restructuring expenses related to this dispute, which consisted primarily of legal and other expenses.
Note 4. Leases
Leases are classified as either finance leases or operating leases based on criteria in Accounting Standards Codification 842. The Company has operating leases for its corporate offices, including the Campus Lease, its former Manhattan Beach Project Innovation Center, its manufacturing facilities, warehouses and vehicles, and to a lesser extent, certain equipment and finance leases. Such leases generally have original lease terms between 2 and 12 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.
On January 14, 2021, the Company entered into the Campus Lease, a 12 -year lease with two 5 -year renewal options to house its corporate headquarters, lab and innovation space (the “Campus Headquarters”) in El Segundo, California. Although the Company is involved in the design of the tenant improvements of the Campus Headquarters, 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 Campus Headquarters until each phase of the tenant improvements is complete. The Company contributed $3.1 million and $55.1 million in payments towards the construction of the Campus Headquarters in the three months ended April 1, 2023 and the year ended December 31, 2022, respectively. These payments are initially recorded in “Prepaid lease costs, non-current” in the Company’s condensed consolidated balance sheets and will ultimately be reclassified as a component of a right-of-use asset upon lease
11
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
commencement for each phase of the lease. In 2022, the tenant improvements associated with Phase 1-A were completed, and the underlying asset was delivered to the Company. As such, upon commencement of Phase 1-A, the Company recognized a $64.1 million right-of-use asset, which included the reclassification of $27.7 million of the construction payments previously included in “Prepaid lease costs, non-current,” and a $36.6 million lease liability.
On February 14, 2023, the Company terminated the lease of its Commerce, California commercialization center. As a result of this termination, during the first quarter of 2023, the balances in the “Operating lease right-of use assets,” “Current portion of operating lease liabilities” and “Operating lease liabilities, net of current portion” were reduced by $11.3 million, $0.8 million and $10.5 million, respectively. Costs associated with this lease through its termination date, including termination costs, are included in operating lease costs related to research and development expenses and are reflected in the tables below.
Lease costs for operating and finance leases were as follows:
| Three Months Ended | ||||||||||||||||||||
| (in thousands) | Statement of Operations Location | April 1, 2023 | April 2, 2022 | |||||||||||||||||
| Operating lease cost: | ||||||||||||||||||||
| Lease cost | Cost of goods sold | $ | $ | |||||||||||||||||
| Lease cost | Research and development expenses | |||||||||||||||||||
| Lease cost | Selling, general and administrative expenses | |||||||||||||||||||
Variable lease cost(1) | Cost of goods sold | |||||||||||||||||||
Variable lease cost(1) | Research and development expenses | |||||||||||||||||||
Variable lease cost(1) | Selling, general and administrative expenses | |||||||||||||||||||
| Operating lease cost | $ | $ | ||||||||||||||||||
| Short-term lease cost: | ||||||||||||||||||||
| Short-term lease cost | Cost of goods sold | $ | $ | |||||||||||||||||
| Short-term lease cost | Research and development expenses | |||||||||||||||||||
| Short-term lease cost | Selling, general and administrative expenses | |||||||||||||||||||
| Short-term lease cost | $ | $ | ||||||||||||||||||
| Finance lease cost: | ||||||||||||||||||||
| Amortization of right-of use assets | Cost of goods sold | $ | $ | |||||||||||||||||
| Amortization of right-of use assets | Research and development expenses | |||||||||||||||||||
| Interest on lease liabilities | Interest expense | |||||||||||||||||||
Variable lease cost(1) | Cost of goods sold | |||||||||||||||||||
| Finance lease cost | $ | $ | ||||||||||||||||||
| Total lease cost | $ | $ | ||||||||||||||||||
____________
(1) Variable lease cost primarily consists of common area maintenance, such as cleaning and repairs.
12
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
Supplemental balance sheet information as of April 1, 2023 and December 31, 2022 related to leases are as follows:
| (in thousands) | Balance Sheet Location | April 1, 2023 | December 31, 2022 | |||||||||||||||||
| Assets | ||||||||||||||||||||
| Operating leases | Operating lease right-of-use assets | $ | $ | |||||||||||||||||
| Finance leases, net | ||||||||||||||||||||
| Total lease assets | $ | $ | ||||||||||||||||||
| Liabilities | ||||||||||||||||||||
| Current: | ||||||||||||||||||||
| Operating lease liabilities | Current portion of operating lease liabilities | $ | $ | |||||||||||||||||
| Finance lease liabilities | Accrued expenses and other current liabilities | |||||||||||||||||||
| Long-term: | ||||||||||||||||||||
| Operating lease liabilities | Operating lease liabilities, net of current portion | |||||||||||||||||||
| Finance lease liabilities | ||||||||||||||||||||
| Total lease liabilities | $ | $ | ||||||||||||||||||
April 1, 2023 | ||||||||||||||
| (in thousands) | Operating Leases | Finance Leases | ||||||||||||
| Remainder of 2023 | $ | $ | ||||||||||||
| 2024 | ||||||||||||||
| 2025 | ||||||||||||||
| 2026 | ||||||||||||||
| 2027 | ||||||||||||||
| Thereafter | ||||||||||||||
| Total undiscounted future minimum lease payments | ||||||||||||||
| Less imputed interest | ( | ( | ||||||||||||
| Total discounted future minimum lease payments | $ | $ | ||||||||||||
April 1, 2023 | ||||||||||||||
| Operating Leases | Finance Leases | |||||||||||||
| Weighted average remaining lease term (years) | ||||||||||||||
| Weighted average discount rate | % | % | ||||||||||||
13
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
Note 5. Inventories
Major classes of inventory were as follows:
| (in thousands) | April 1, 2023 | December 31, 2022 | |||||||||
| Raw materials and packaging | $ | $ | |||||||||
| Work in process | |||||||||||
| Finished goods | |||||||||||
| Total | $ | $ | |||||||||
Note 6. Property, Plant and Equipment
The Company records property, plant and equipment at cost and includes finance lease assets in “Property, plant and equipment, net” in its condensed consolidated balance sheets. A summary of property, plant, and equipment as of April 1, 2023 and December 31, 2022, is as follows:
| (in thousands) | April 1, 2023 | December 31, 2022 | ||||||||||||
| Manufacturing equipment | $ | $ | ||||||||||||
| Research and development equipment | ||||||||||||||
| Leasehold improvements | ||||||||||||||
| Building | ||||||||||||||
| Finance leases | ||||||||||||||
| Software | ||||||||||||||
| Furniture and fixtures | ||||||||||||||
| Vehicles | ||||||||||||||
| Land | ||||||||||||||
| Assets not yet placed in service | ||||||||||||||
| Total property, plant and equipment | $ | $ | ||||||||||||
| Less: accumulated depreciation and amortization | ||||||||||||||
| Property, plant and equipment, net | $ | $ | ||||||||||||
Depreciation and amortization expense for the three months ended April 1, 2023 and April 2, 2022 was $6.0 million and $7.1 million, respectively. Of the total depreciation and amortization expense in the three months ended April 1, 2023 and April 2, 2022, $5.4 million and $6.0 million, respectively, were recorded in cost of goods sold, $0.5 million and $1.0 million, respectively, were recorded in research and development expenses, and $0.1 million and $0.1 million, respectively, were recorded in SG&A expenses in the Company’s condensed consolidated statements of operations.
During the first quarter of 2023, the Company completed a reassessment of the useful lives of its large manufacturing and research and development equipment, and determined that the Company should increase the estimated useful lives for certain of its equipment from a range of 5 to 10 years to a uniform 10 years. The timing of this reassessment was based on a combination of factors accumulating over time, including historical useful life information and changes in the Company’s planned use of the equipment, that provided the Company with updated information that allowed it to make a better estimate of the economic lives of such equipment. This reassessment was accounted for as a change in accounting
14
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
estimate and was made on a prospective basis effective January 1, 2023. This change in accounting estimate decreased depreciation expense for the three months ended April 1, 2023 by $5.6 million, impacting cost of goods sold and research and development expenses by $5.1 million and $0.5 million, respectively, and decreased both basic and diluted net loss per share available to common stockholders by $0.09
The Company had $4.7 million and $5.9 million in property, plant and equipment concluded to meet the criteria for assets held for sale as of April 1, 2023 and December 31, 2022, respectively. Amounts previously classified as assets held for sale were sold in a prior period for amounts that approximated book value for which a note receivable of $3.8
Note 7. Debt
The following is a summary of debt balances as of April 1, 2023 and December 31, 2022:
| (in thousands) | April 1, 2023 | December 31, 2022 | |||||||||
| Convertible senior notes | $ | $ | |||||||||
| Debt issuance costs | ( | ( | |||||||||
| Long-term debt | $ | $ | |||||||||
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. 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 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. In each of the three months ended April 1, 2023 and April 2, 2022, the Company recognized $1.0 million in interest expense related to the amortization of the debt issuance costs related to the Notes. The effective interest rate in both of the three month periods ended April 1, 2023 and April 2, 2022 was 0.09
The following is a summary of the Company’s Notes as of April 1, 2023:
| (in thousands) | Principal Amount | Unamortized Issuance Costs | Net Carrying Amount | Fair Value | ||||||||||||||||||||||||||||
| Amount | Leveling | |||||||||||||||||||||||||||||||
| $ | $ | $ | $ | 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 April 1, 2023, the estimated fair value of the Notes was approximately $284.6 million. 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 March 14, 2023, the last day of the period when the notes were traded.
15
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
Note 8. Stockholders’ (Deficit) Equity
As of April 1, 2023, the Company’s shares consisted of 500,000,000 authorized shares of common stock, par value $0.0001 per share, of which 64,150,754 500,000 authorized shares of preferred stock, par value $0.0001 per share, of which no
As of December 31, 2022, the Company’s shares consisted of 500,000,000 authorized shares of common stock, par value $0.0001 per share, of which 63,773,982 500,000 authorized shares of preferred stock, par value $0.0001 per share, of which no
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.
Note 9. Share-Based Compensation
In 2019, the Company’s 2011 Equity Incentive Plan (“2011 Plan”) was amended, restated and re-named the 2018 Equity Incentive Plan (“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, 2023, the maximum aggregate number of shares that may be issued under the 2018 Plan increased to 23,060,440 shares, which includes an increase of 2,144,521 shares effective January 1, 2023 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, 2022 | |||||
| Authorized | |||||
| Granted | ( | ||||
| Shares withheld to cover taxes | |||||
| Forfeited | |||||
| Balance - April 1, 2023 | |||||
As of April 1, 2023 and December 31, 2022, there were 4,714,243 and 3,999,933 shares, respectively, issuable under stock options outstanding, 1,604,302 and 993,313 shares, respectively, issuable under unvested RSUs outstanding, 8,550,850 and 8,145,769 shares, respectively, issued for stock option exercises, RSU settlement, and restricted stock grants, and 8,288,769 and 7,848,832 shares, respectively, available for grant under the 2018 Plan.
16
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
Stock Options
| Three Months Ended | ||||||||||||||
| April 1, 2023 | April 2, 2022 | |||||||||||||
| Risk-free interest rate | ||||||||||||||
| Average expected term (years) | ||||||||||||||
| Expected volatility | ||||||||||||||
| Dividend yield | ||||||||||||||
Option grants to employees in the three months ended April 1, 2023 and April 2, 2022 generally vest 25 3-year
The following table summarizes the Company’s stock option activity during the three months ended April 1, 2023:
| Number of Stock Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | Aggregate Intrinsic Value (in thousands)(1) | ||||||||||||||||||||
| Outstanding at December 31, 2022 | $ | $ | |||||||||||||||||||||
| Granted | $ | — | $ | — | |||||||||||||||||||
| Exercised | ( | $ | — | $ | |||||||||||||||||||
| Canceled/Forfeited | ( | $ | — | $ | — | ||||||||||||||||||
| Outstanding at April 1, 2023 | $ | $ | |||||||||||||||||||||
| Vested and exercisable at April 1, 2023 | $ | $ | |||||||||||||||||||||
| Vested and expected to vest at April 1, 2023 | $ | $ | |||||||||||||||||||||
__________
During the three months ended April 1, 2023 and April 2, 2022, the Company recorded $4.0 million and $4.1 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 April 1, 2023, there was $21.4 million in unrecognized compensation expense related to nonvested stock option awards which is expected to be recognized over a weighted average period of 1.5 years.
Restricted Stock Units
RSU grants to new and continuing employees in the three months ended April 1, 2023 generally 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
17
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
date. Some of the RSU grants to continuing employees in the three months ended April 1, 2023 vest 50 % of the total award on the first anniversary of the vesting commencement date, and thereafter vest quarterly over the remaining 4 quarters of the award, subject to continued employment through the vesting date. Some of the RSU grants to continuing employees in the three months ended April 1, 2023 vest quarterly over 4 quarters, subject to continued employment through the vesting date.
RSU grants to new and continuing employees in the three months ended April 2, 2022 generally 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. Some of the RSU grants to continuing employees in the three months ended April 2, 2022 vest 50 % of the total award on the first anniversary of the vesting commencement date, and thereafter vest quarterly over the remaining 4 quarters of the award, subject to continued employment through the vesting date. RSU awards to nonemployee ambassadors in the three months ended April 2, 2022 vest on varying dates, subject to continued service through the vesting date.
The following table summarizes the Company’s RSU activity during the three months ended April 1, 2023:
________
| Number of Units | Weighted Average Grant Date Fair Value Per Unit | |||||||||||||
| Unvested at December 31, 2022 | $ | |||||||||||||
| Granted | $ | |||||||||||||
Vested(1) | ( | $ | ||||||||||||
| Canceled/Forfeited | ( | $ | ||||||||||||
| Unvested at April 1, 2023 | $ | |||||||||||||
(1) Includes 14,323 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 April 1, 2023 and April 2, 2022, the Company recorded $5.5 million and $5.2 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 April 1, 2023, there was $23.2 million in unrecognized compensation expense related to unvested RSUs which is expected to be recognized over a weighted average period of 1.3 years.
Employee Stock Purchase Plan
As of April 1, 2023, the maximum aggregate number of shares that may be issued under the 2018 Employee Stock Purchase Plan (“ESPP”) was 2,948,715 shares of common stock, including an increase of 536,130 shares effective January 1, 2023 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.
18
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
Note 10. Commitments and Contingencies
Leases
On January 14, 2021, the Company entered into the Campus Lease with HC Hornet Way, LLC, a Delaware limited liability company (the “Landlord”), to house the Company’s Campus Headquarters.
Under the terms of the Campus Lease, the Company will lease an aggregate of approximately 282,000 rentable square feet in a portion of a building located at 888 N. Douglas Street, El Segundo, California, to be built out by the Landlord and delivered to the Company in multiple phases. In 2022, the tenant improvements associated with Phase 1-A were completed and the underlying asset was delivered to the Company. Therefore, the Company began recognizing a right-of-use asset and lease liability for Phase1-A in its consolidated balance sheet in the year ended December 31, 2022. See Note 4. Aggregate payments towards base rent over the initial lease term associated with the remaining phases not yet delivered to the Company will be approximately $118.4 million.
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. The letter of credit is secured by a $12.6
On February 14, 2023, the Company terminated the lease of its Commerce, California commercialization center. As a result of this termination, during the first quarter of 2023, the balances in the “Operating lease right-of use assets,” “Current portion of operating lease liabilities” and “Operating lease liabilities, net of current portion” were reduced by $11.3 million, $0.8 million and $10.5 million, respectively.
China Investment and Lease Agreement
On September 22, 2020, the Company and its wholly-owned subsidiary, Beyond Meat (Jiaxing) Food Co., Ltd. (“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.
During Phase 1, the Company agreed to invest $10.0 million as the registered capital of BYND JX in the JXEDZ through intercompany investment in BYND JX and BYND JX agreed to lease a facility in the JXEDZ for a minimum of two 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 agreed to lease and renovate a facility in the JXEDZ and lease it for a minimum of two years . In the year ended December 31, 2022, the lease was amended to extend the term for an additional five years without rent escalation. In the fourth quarter of 2021, BYND JX leased an approximately 12,000 square foot facility in Shanghai, China, for a period of 8 years, which is used as a local research and development facility to support the local manufacturing operations. As of April 1, 2023, the Company had invested $22.0 million as the registered capital of BYND JX and advanced $20.0 million to BYND JX.
19
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
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 to $40.0 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.
The Planet Partnership
On January 25, 2021, the Company entered into the Planet Partnership, LLC (“TPP”), a joint venture with PepsiCo, Inc. (“PepsiCo”) to develop, produce and market innovative snack and beverage products made from plant-based protein. For the three months ended April 1, 2023 and April 2, 2022, the Company recognized its share of the net losses in TPP, in the amount of $3.2 million and $0.7 million, respectively. As of the year ended December 31, 2022, the Company had contributed its share of the investment in TPP in the amount of $24.3 million. In the three months ended April 1, 2023, the Company contributed an additional $3.3 million as its share of an additional investment in TPP, resulting in a total contribution of $27.6 million as of April 1, 2023. See Note 2 and Note 13.
In the first quarter of 2023, the Company continued the process of restructuring certain contracts and operating activities related to Beyond Meat Jerky.
Purchase Commitments
As of April 1, 2023, the Company had committed to purchase pea protein inventory totaling $40.2 million in the remainder of 2023.
On April 6, 2022, the Company entered into a co-manufacturing agreement (“Agreement”) with a co-manufacturer to manufacture various products for the Company. The Agreement includes a minimum order quantity commitment per month and an aggregate quantity over a 5-year term. For a portion of the contract term, if the minimum order for a month is not fulfilled, the Company may be assessed a fee per pound, which fee may be waived by the co-manufacturer upon reaching certain aggregate quantity limits.
| (in thousands) | As of April 1, 2023 | |||||||
| Remainder of 2023 | $ | |||||||
| 2024 | ||||||||
| 2025 | ||||||||
| 2026 | ||||||||
| 2027 | ||||||||
| Total | $ | |||||||
Litigation
Consumer Class Actions Regarding Protein Claims
From May 31, 2022 through January 13, 2023, multiple putative class action lawsuits were filed against the Company in various federal and state courts alleging that the labeling and marketing of certain of the Company’s products is false and/or misleading under federal and/or various states’ laws. Specifically, each of these lawsuits allege one or more of the following theories of liability: (i) that the labels and related marketing of the challenged products misstate the quantitative amount of protein that is provided by each serving of the product; (ii) that the labels and related marketing of the challenged
20
BEYOND MEAT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
products misstate the percent daily value of protein that is provided by each serving of the product; and (iii) that the Company has represented that the challenged products are “all-natural,” “organic,” or contain no “synthetic” ingredients when they in fact contain methylcellulose, an allegedly synthetic ingredient. The named plaintiffs of each complaint seek to represent classes of nationwide and/or state-specific consumers, and seek on behalf of the putative classes damages, restitution, and injunctive relief, among other relief. Additional complaints asserting these theories of liability are possible. Some lawsuits previously filed were voluntarily withdrawn or dismissed without prejudice; though they may be refiled.
On November 14, 2022, Beyond Meat filed a motion with the Judicial Panel on Multidistrict Litigation to transfer and consolidate all pending class actions. No party opposed the motion, and the Panel held oral argument on the motion on January 26, 2023. The Panel granted the motion on February 1, 2023, consolidating the pending class action lawsuits and transferring them to Judge Sara Ellis in the Northern District of Illinois for pre-trial proceedings.
On March 3, 2023, the court held the initial status conference. The court granted plaintiffs’ motion to appoint interim class counsel and set a briefing schedule on the Company’s anticipated motion to dismiss. On May 3, 2023, plaintiffs filed an amended consolidated complaint. The Company’s motion to dismiss is due by June 5, 2023, plaintiffs' response is due by July 7, 2023, and the Company’s reply is due by July 21, 2023. A telephonic conference was set for October 17, 2023 for a ruling on the motion to dismiss.
The Company intends to vigorously defend against all claims asserted in the complaints. 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 these lawsuits is not estimable.
The active lawsuits are:
•Roberts v. Beyond Meat, Inc., No. 1:22-cv-02861 (N.D. Ill.) (filed May 31, 2022)
•Cascio v. Beyond Meat, Inc., No. 1:22-cv-04018 (E.D.N.Y.) (filed July 8, 2022)
•Miller v. Beyond Meat, Inc., No. 1:22-cv-06336 (S.D.N.Y.) (filed July 26, 2022)
•Garcia v. Beyond Meat, Inc., No. 4:22-cv-00297 (S.D. Iowa.) (filed September 9, 2022)
•Borovoy v. Beyond Meat, Inc., No. 1:22-cv-06302 (N.D. Ill.) (filed September 30, 2022 in DuPage Co., Ill.; removed on Nov. 10, 2022)
•Zakinov v Beyond Meat, Inc., No. 4:23-cv-00144 (S.D. Tex.) (filed January 13, 2023)
Interbev
In October 2020, Interbev, a French trade association for the cattle industry sent a cease-and-desist letter to one of the Company’s contract manufacturers alleging that the use of “meat” and meat-related terms is misleading the French consumer. Despite the Company’s best efforts to reach a settlement, including a formal settlement proposal from the Company in March 2021, the association no longer responded. Instead, on March 13, 2022, the Company was served a summons by Interbev to appear before the Commercial Court of Paris. The summons alleges that the Company misleads the French consumer with references to e.g. “plant based meat,” “plant based burger” and related descriptive names, and alleges that the Company is denigrating meat and meat products. The relief sought by Interbev includes (i) changing the presentation of Beyond Meat products to avoid any potential confusion with meat products, (ii) publication of the judgment of the court in the media, and (iii) damages of EUR 200,000 . On October 12, 2022, the Company submitted its brief in defense. On February 1, 2023, the French trade association submitted updated pleadings to the Commercial Court. The association maintains its position that the Company is misleading the consumer, and additionally alleges that it is engaging in unlawful comparative advertising of its products with respect to meat and meat products. The relief sought is unchanged. The Company strongly disputes these claims and will defend its position with
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Notes to Unaudited Condensed Consolidated Financial Statements (continued)
the utmost vigor. The filing date for the Company’s response is May 24, 2023. The litigation is expected to take at least 18 months in the first instance, and if the Court rules against the Company, it could disrupt the Company’s ability to market in France.
On April 21, 2023, Interbev filed two actions before the European Union Intellectual Property Office to cancel the Company’s EU trademark registration for the Caped Steer logo. Interbev is seeking cancellation of the trademark, alleging that the trademark is invalid because it allegedly misleads the public about the nature and characteristics of the products offered under the mark. Interbev is also seeking cancellation on the basis of lack of genuine use, despite the fact that the mark is within the five-year grace period where it cannot be challenged for lack of use. The Company’s deadline to respond is July 7, 2023. The Company strongly disputes these claims and is evaluating appropriate next steps to defend its use of the Caped Steer logo.
Decree prohibiting meat names
On June 29, 2022, France adopted a Decree implementing a prohibition of June 2020 on the use of denominations used for foodstuffs of animal origin to describe, market or promote foodstuffs containing plant proteins (“Decree”). The Decree prohibits the use of meat names (such as “sausage” or “meatballs”) for plant-based products, from its date of entry into force on October 1, 2022. On July 27, 2022, the French High Administrative Court issued a temporary and partial suspension of the execution of the Decree, in response to a motion filed by a French trade association. While the Court has not yet handed down a decision on the merits, the suspension indicates that it has serious doubts as to the substantive lawfulness of the Decree.
The Company does not believe that the Decree complies with the laws of the European Union (EU), and in particular the principle of free movement of goods, nor with French rules requiring laws to be clear and accessible. On October 21, 2022, the Company filed a request for annulment of the Decree before the French High Administrative Court. On November 16, 2022, the Company filed a voluntary intervention in the French trade association’s own application for annulment, to ensure that both the Company’s voice and strong EU law arguments are heard. On January 23, 2023, the French Ministry for the Economy responded to the Company’s request for annulment and intervention. The Ministry’s response makes clear that it will enforce the Decree as a blanket ban on the use of all “meaty” names for plant-based products in France. The Company maintains its position that the Decree is illegal under French and EU law, and will continue to fight the Decree with utmost vigor. On April 20, 2023, a number of plant-based companies voluntarily filed interventions in support of the Company’s case. A decision from the Court is expected sometime during 2023, and should the Court hold that the Decree is lawful, it could impact the Company’s ability to market in France, as it will need to take steps to amend its labels in line with the Decree.
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.