Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 25, 2021 | Nov. 05, 2021 | |
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Sep. 25, 2021 | |
Entity File Number | 001-40837 | |
Entity Registrant Name | Sovos Brands, Inc | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 81-5119352 | |
Entity Address State Or Province | CO | |
Entity Address, Address Line One | 168 Centennial Parkway | |
Entity Address, Address Line Two | SuiteĀ 200 | |
Entity Address, City or Town | Louisville | |
Entity Address, Postal Zip Code | 80027 | |
City Area Code | 720 | |
Local Phone Number | 316-1225 | |
Title of 12(b) Security | Common Stock, $0.001 par value per share | |
Trading Symbol | SOVO | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | No | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 100,892,547 | |
Entity Central Index Key | 0001856608 | |
Current Fiscal Year End Date | --12-26 | |
Document Fiscal Year Focus | 2021 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 25, 2021 | Dec. 26, 2020 |
CURRENT ASSETS: | ||
Cash and cash equivalents | $ 43,115 | $ 37,026 |
Accounts receivable, net | 80,269 | 60,996 |
Inventories | 60,277 | 47,069 |
Prepaid expenses and other current assets | 10,965 | 4,388 |
Total current assets | 194,626 | 149,479 |
Property and equipment, net | 56,558 | 59,481 |
Operating lease right-of-use assets | 16,267 | |
Goodwill | 437,451 | 437,290 |
Intangible assets, net | 471,465 | 491,895 |
Other long-term assets | 6,934 | 6,681 |
TOTAL ASSETS | 1,183,301 | 1,144,826 |
CURRENT LIABILITIES: | ||
Accounts payable | 33,597 | 31,170 |
Accrued expenses | 60,414 | 65,101 |
Current portion of long-term debt | 5,897 | 3,818 |
Operating lease liabilities | 3,176 | |
Total current liabilities | 103,084 | 100,089 |
Long-term debt, net of debt issuance costs | 768,923 | 360,046 |
Deferred income taxes | 81,248 | 74,733 |
Long-term operating lease liabilities | 18,089 | |
Other long-term liabilities | 1,413 | 13,257 |
TOTAL LIABILITIES | 972,757 | 548,125 |
COMMITMENTS AND CONTINGENCIES (Note 11) | ||
STOCKHOLDERS' EQUITY: | ||
Preferred stock, $0.001 par value per share, 10,000,000 shares authorized, no shares issued and outstanding | ||
Common stock, $0.001 par value per share, 500,000,000 shares authorized, 74,058,447 and 74,058,447 shares issued and outstanding as of September 25, 2021 and December 26, 2020, respectively | 74 | 74 |
Stockholder's note receivable | (6,000) | |
Additional paid-in-capital | 256,470 | 654,386 |
Accumulated deficit | (46,000) | (51,759) |
TOTAL STOCKHOLDERS' EQUITY | 210,544 | 596,701 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 1,183,301 | $ 1,144,826 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 25, 2021 | Dec. 26, 2020 |
Condensed Consolidated Balance Sheets | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, authorized (in shares) | 10,000,000 | 10,000,000 |
Preferred stock, issued (in shares) | 0 | 0 |
Preferred stock, outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, authorized (in shares) | 500,000,000 | 500,000,000 |
Common stock, issued (in shares) | 74,058,447 | 74,058,447 |
Common stock, outstanding (in shares) | 74,058,447 | 74,058,447 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 25, 2021 | Sep. 26, 2020 | Sep. 25, 2021 | Sep. 26, 2020 | |
Condensed Consolidated Statements of Operations | ||||
Net sales | $ 178,733 | $ 136,928 | $ 529,942 | $ 398,336 |
Cost of sales | 128,878 | 91,263 | 368,642 | 265,989 |
Gross profit | 49,855 | 45,665 | 161,300 | 132,347 |
Selling general, and administrative expenses | 31,189 | 33,311 | 91,367 | 83,510 |
Depreciation and amortization expenses | 7,236 | 6,051 | 21,631 | 17,923 |
Loss on extinguishment of debt | 9,717 | |||
Operating income | 11,430 | 6,303 | 38,585 | 30,914 |
Interest expense | 12,547 | 4,293 | 24,613 | 14,912 |
Income (loss) before income taxes | (1,117) | 2,010 | 13,972 | 16,002 |
Income tax (expense) benefit | (3,497) | 226 | (8,213) | (4,698) |
Net income (loss) | $ (4,614) | $ 2,236 | $ 5,759 | $ 11,304 |
Earnings (loss) per share: | ||||
Basic (in dollars per shares) | $ (0.06) | $ 0.03 | $ 0.08 | $ 0.15 |
Diluted (in dollars per shares) | $ (0.06) | $ 0.03 | $ 0.08 | $ 0.15 |
Weighted average shares outstanding: | ||||
Basic (in shares) | 74,058,447 | 74,058,719 | 74,058,447 | 74,058,644 |
Diluted (in shares) | 74,058,447 | 76,394,135 | 74,058,453 | 76,259,190 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands | Common Stock | Stockholder's note receivable | Additional Paid-in Capital | Retained Earnings (Accumulated Deficit). | Total |
Balances, at Beginning of Period at Dec. 28, 2019 | $ 74 | $ (6,000) | $ 652,507 | $ (62,584) | $ 583,997 |
Balances, Beginning (in shares) at Dec. 28, 2019 | 74,058,747 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Equity-based compensation expense | 1,456 | 1,456 | |||
Cash contributions to Ultimate Parent | (35) | (35) | |||
Cash contributions to Ultimate Parent (in shares) | (300) | ||||
Net income | 11,304 | 11,304 | |||
Balances, at End of period at Sep. 26, 2020 | $ 74 | (6,000) | 653,928 | (51,280) | 596,722 |
Balances, Ending (in shares) at Sep. 26, 2020 | 74,058,447 | ||||
Balances, at Beginning of Period at Jun. 27, 2020 | $ 74 | (6,000) | 653,445 | (53,516) | 594,003 |
Balances, Beginning (in shares) at Jun. 27, 2020 | 74,058,447 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Equity-based compensation expense | 483 | 483 | |||
Net income | 2,236 | 2,236 | |||
Balances, at End of period at Sep. 26, 2020 | $ 74 | (6,000) | 653,928 | (51,280) | 596,722 |
Balances, Ending (in shares) at Sep. 26, 2020 | 74,058,447 | ||||
Balances, at Beginning of Period at Dec. 26, 2020 | $ 74 | (6,000) | 654,386 | (51,759) | 596,701 |
Balances, Beginning (in shares) at Dec. 26, 2020 | 74,058,447 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Proceeds from stockholder's note receivable | $ 6,000 | 6,000 | |||
Equity-based compensation expense | 2,084 | 2,084 | |||
Dividend distribution ($5.40 per share) | (400,000) | (400,000) | |||
Net income | 5,759 | 5,759 | |||
Balances, at End of period at Sep. 25, 2021 | $ 74 | 256,470 | (46,000) | 210,544 | |
Balances, Ending (in shares) at Sep. 25, 2021 | 74,058,447 | ||||
Balances, at Beginning of Period at Jun. 26, 2021 | $ 74 | 255,491 | (41,386) | 214,179 | |
Balances, Beginning (in shares) at Jun. 26, 2021 | 74,058,447 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Equity-based compensation expense | 979 | 979 | |||
Net income | (4,614) | (4,614) | |||
Balances, at End of period at Sep. 25, 2021 | $ 74 | $ 256,470 | $ (46,000) | $ 210,544 | |
Balances, Ending (in shares) at Sep. 25, 2021 | 74,058,447 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Changes in Stockholders' Equity (Parenthetical) | 9 Months Ended |
Sep. 25, 2021$ / shares | |
Condensed Consolidated Statements of Changes in Stockholders' Equity | |
Dividend distributions (in dollar per share) | $ 5.40 |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Cash Flows - USD ($) | 9 Months Ended | |
Sep. 25, 2021 | Sep. 26, 2020 | |
Operating activities | ||
Net income | $ 5,759,000 | $ 11,304,000 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 28,302,000 | 24,747,000 |
Equity-based compensation expense | 2,084,000 | 1,456,000 |
Deferred income taxes | 6,516,000 | 4,207,000 |
Amortization of debt issuance costs | 1,566,000 | 1,253,000 |
Non-cash operating lease expense | 1,683,000 | |
Loss on sale/disposal of property and equipment | 54,000 | 407,000 |
Loss on extinguishment of debt | 9,717,000 | |
Other | 229,000 | 1,074,000 |
Changes in operating assets and liabilities: | ||
Accounts receivable, net | (18,931,000) | (10,387,000) |
Inventories | (13,642,000) | (4,088,000) |
Prepaid expenses and other current assets | (6,588,000) | (630,000) |
Other long-term assets | 396,000 | (66,000) |
Accounts payable | 2,582,000 | 1,810,000 |
Accrued expenses | 649,000 | 19,993,000 |
Other long-term liabilities | 12,000 | 1,704,000 |
Operating lease liabilities | (2,083,000) | |
Net cash provided by operating activities | 18,305,000 | 52,784,000 |
Investing activities | ||
Purchases of property and equipment | (5,111,000) | (2,905,000) |
Net cash used in investing activities | (5,111,000) | (2,905,000) |
Financing activities | ||
Contributions to Ultimate Parent | (35,000) | |
Payments of debt issuance costs | (3,046,000) | |
Proceeds from long-term debt | 769,136,000 | |
Repayments of long-term debt | (374,146,000) | (1,400,000) |
Repayments of capital lease obligations | (93,000) | |
Repayments of capital lease obligations | (49,000) | |
Proceeds from revolver | 42,500,000 | |
Repayments of revolver | (42,500,000) | |
Proceeds from stockholder's note receivable | 6,000,000 | |
Contingent earnout consideration paid | (5,000,000) | |
Dividend paid | (400,000,000) | |
Net cash used in financing activities | (7,105,000) | (1,528,000) |
Cash and cash equivalents | ||
Net increase in cash and cash equivalents | 6,089,000 | 48,351,000 |
Cash and cash equivalents at beginning of period | 37,026,000 | 30,681,000 |
Cash and cash equivalents at end of period | 43,115,000 | 79,032,000 |
Supplemental disclosures of cash flow information | ||
Cash paid for interest | 18,603,000 | 12,874,000 |
Cash paid for taxes | 2,236,000 | 364,000 |
Proceeds from income tax refunds | (44,000) | (1,798,000) |
Non-cash investing and financing transactions | ||
Lease liabilities arising from operating lease right-of-use assets recognized at ASU No. 2016-02 transition | 21,711,000 | |
Lease liabilities arising from operating lease right-of-use assets recognized after ASU No. 2016-02 transition | 1,638,000 | |
Acquisition of property and equipment through tenant improvement allowance | 822,000 | |
Acquisition of property and equipment not yet paid | $ 43,000 | $ 65,000 |
Company Overview
Company Overview | 9 Months Ended |
Sep. 25, 2021 | |
Company Overview | |
Company Overview | 1. Company Overview Sovos Brands, Inc. and its subsidiaries (the āCompany,ā āwe,ā āourā) is a consumer-packaged food company that creates value for its stockholders through acquisition and executive management of brands in the food industry. On September 22, 2021, Sovos Brands, Inc. priced its initial public offering (the āIPOā) of 23,334,000 shares of its common stock, $0.001 par value per share, which excluded the underwritersā option to purchase up to an additional 3,500,100 shares of common stock, at an offering price of $12.00 per share. In conjunction with the IPO, the Company became actively traded on the Nasdaq Global Select Market (āNASDAQā) listed under the trade symbol of āSOVO.ā Upon the closing of the IPO on September 27, 2021, the Company issued 23,334,000 shares of its common stock and received approximately $263.2 million, net of underwriting discounts and commissions. Subsequent to the IPO, the underwriters exercised their options to purchase an additional 3,500,100 shares of common stock. The Company closed its sale of such additional shares on October 5, 2021, resulting in net proceeds of approximately $39.5 million, net of underwriting discounts and commissions. See Note 18. Subsequent Events ā Prior to the IPO, Sovos Brands Limited Partnership (the āUltimate Parentā or the āLimited Partnershipā) owned 100% of Sovos Brands, Inc., which owns 100% of Sovos Brands Holdings, Inc., which owns 100% of Sovos Brands Intermediate, Inc. (āSovos Intermediateā). Sovos Brands Intermediate, Inc. has four wholly-owned operating subsidiaries: Raoās Specialty Foods, Inc. (āRaoāsā); Bottom Line Food Processors, Inc. doing business as Michael Angeloās Gourmet Foods, Inc. (āMichael Angeloāsā); Noosa Yoghurt, LLC (āNoosaā); and Birch Benders, LLC (āBirch Bendersā). Through its wholly-owned operating subsidiaries, the Company produces and distributes food products in various locations throughout the United States. The Company was founded on January 17, 2017 and has its executive headquarters in Louisville, Colorado. The unaudited condensed consolidated financial statements include the accounts of Sovos Brands, Inc. and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated. Unless the context otherwise requires, āwe,ā āus,ā āour,ā āSovos Brandsā and the āCompanyā refer to Sovos Brands, Inc. and its subsidiaries. The Company maintains its accounting records on a 52/53-week fiscal year, ending on the last Saturday in December of each year. Description of Business Sovos Brands, Inc. is a consumer-packaged food company that is focused on acquiring and building disruptive growth brands that bring todayās consumers great tasting food that fits the way they live. The Companyās principal products include a variety of pasta sauces, dry pasta, soups, frozen entrees, yogurts, pancake and waffle mixes, other baking mixes, and frozen waffles, which are primarily sold in the United States. The Company sells products marketed under the brand names Raoās Michael Angeloās noosa Birch Benders Unaudited Interim Condensed Consolidated Financial Statements The interim condensed consolidated financial statements and related notes of the Company and its subsidiaries are unaudited. The unaudited interim condensed consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (āGAAPā) and the rules and regulations of the Securities and Exchange Commission (the āSECā). The unaudited interim condensed consolidated financial statements reflect all adjustments and disclosures which are, in our opinion, necessary for a fair presentation of the results of operations, financial position and cash flows for the indicated periods. All such adjustments were of a normal and recurring nature. The year-end balance sheet data was derived from the audited financial statements and, in accordance with the instructions to Form 10-Q, certain information and footnote disclosures required by GAAP have been condensed or omitted. The results reported in these unaudited interim condensed consolidated financial statements are not necessarily indicative of the results that may be reported for the entire fiscal year and should be read in conjunction with our consolidated financial statements for the fiscal year ended December 26, 2020, included in our Prospectus filed with the SEC on September 24, 2021 (āProspectusā). |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 25, 2021 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Refer to Note 2. Summary of Significant Accounting Policies Dividends Paid The Company does not have an established dividend policy. The Companyās board of directors (the āBoardā) has sole authority to determine if and when dividends will be declared and on what terms. Dividend payments, if any, depend on the Companyās earnings, capital requirements, financial condition, excess availability under the Companyās lines of credit, market and economic conditions, and other factors considered relevant. The Company will record all dividends as a reduction to additional paid-in capital ("APIC"). Once APIC is reduced to zero, dividends will be recorded against retained earnings or accumulated deficit. See Note 13. Stockholdersā Equity Leasing Arrangements Effective December 27, 2020, the Company adopted Accounting Standards Update 2016-02 (ASU 2016-02) which created a new topic, ASC 842 āLeases.ā Subsequent to the issuance of ASU 2016-02, ASC 842 has been amended by various updates that amended and clarified the implementation of the standard. In accordance with ASC 842, the Company, at the inception of the contract, determines whether a contract is or contains a lease. The Company records right-of-use assets and lease obligations for its finance and operating leases with a term greater than 12 months, which are initially recognized based on the discounted future minimum lease payments over the term of the lease. The Company has elected the short-term practical expedient for short-term leases with an initial term of 12 months or less. As a result, the Company does not apply balance sheet recognition for these short-term leases and records aggregated lease expense. The Company uses the implicit rate in the lease, if available, for calculating the present value of the lease payments. If the implicit rate is not readily determinable, the Company will use the applicable incremental borrowing rate in calculating the present value of the sum of the lease payments. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease. The Company evaluates renewal options at lease inception and on an ongoing basis and includes renewal options that it is reasonably certain to exercise in its expected lease terms when classifying leases and measuring lease liabilities. Some leases also include early termination options, which can be exercised under specific conditions. Additionally, certain leases contain incentives, such as construction allowances from landlords. These incentives reduce the right-of-use asset related to the lease. The Company recognizes expense for operating leases on a straight-line basis over the lease term. The Company recognizes interest expense and depreciation expense for finance leases. Depreciation expense for assets held under finance leases are computed using the straight-line method over the lease term or useful life for leases that contain a transfer of title or reasonably certain purchase option. The Company elected to combine lease and non-lease components for all asset classes. The Companyās lease agreements may contain variable lease payments for increases in rental payment as a result of indexation and variable storage and shipping utilization, common area maintenance, property tax, and utility charges, which are excluded from the measurement of its right-of-use assets and lease liabilities and are recognized as variable payments in the period in which the obligation for those payments is incurred. The Companyās real estate leases include base rent escalation clauses. The majority of these are based on the change in a local consumer price or similar inflation index. Payments that may vary based on an index or rate are included in the measurement of our right-of-use assets and lease liabilities at the rate as of the commencement date with any subsequent changes to those payments being recognized as variable payments in the period in which they occur. The Company does not have significant residual value guarantees or restrictive covenants in the lease portfolio. See Note 10. Leases New Accounting Pronouncements and Policies Recently Adopted Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) The Company early adopted ASU 2016-02 and all associated amendments on the first day of fiscal year 2021 (December 27, 2020) which includes, as allowed under ASU 2018-11, the ability to recognize a cumulative-effect adjustment through opening accumulated deficit as of the date of adoption. The Company elected the package of practical expedients permitted under the transition guidance, which allows the Company to carryforward its historical assessments of: (1) whether contracts are, or contain, leases, (2) lease classification and (3) initial direct costs. The Company did not elect the hindsight practical expedient. The Company elected a policy of not recording leases on its Condensed Consolidated Balance Sheets when the leases have a term of 12 months or less and the Company is not reasonably certain to elect an option to renew the leased asset. Due to the adoption of this guidance, the Company recognized operating right-of-use assets and operating lease liabilities of $16.3 million and $21.7 million, respectively, on the Condensed Consolidated Balance Sheets as of the date of adoption. The difference between the right-of-use assets and lease liabilities is primarily due to the accrual for lease payments as a result of straight-line lease expense and unamortized tenant incentive liability balances. There was no impact to opening accumulated deficit as a result of the adoption of the guidance. The adoption of this new guidance did not have a material impact on the Companyās results of operations, cash flows, and liquidity, and did not have a material impact on the Companyās covenant compliance under its existing credit agreement. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments ā Credit Losses (Topic 326) ā Measurement of Credit Losses on Financial Instruments In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes In October 2020, the FASB issued ASU No. 2020-10, Codification Improvements, which provides updates for technical corrections, clarifications to guidance, simplifications to wording or structure of guidance, and other minor improvements across various areas of accounting within GAAP. This ASU is effective for all entities for fiscal years beginning after December 15, 2020. The amendments of this ASU should be applied retrospectively. The Company adopted this standard effective December 27, 2020 and the adoption of the standard did not have a material impact on its consolidated financial statements or result in any retrospective changes. Recently Issued Accounting Pronouncements Not Yet Adopted In March 2020, the Financial Accounting Standards Board (the āFASBā) issued Accounting Standards Update (āASUā) No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. Reference Rate Reform (Topic 848) |
Business Acquisitions
Business Acquisitions | 9 Months Ended |
Sep. 25, 2021 | |
Business Acquisitions | |
Business Acquisitions | 3. Business Acquisitions On October 23, 2020, the Company completed the purchase of 100% ownership interest in Birch Benders, a provider of pancake and waffle mix, and frozen waffles, whose products cater to a variety of lifestyles, including organic, plant-based, protein, paleo and keto alternatives. The acquisition diversified the Companyās consumer base and strengthened its presence in the breakfast and snacking categories. Consideration transferred for the transaction totaled $151.4 million, of which $146.4 million was paid with cash at closing, and $5.0 million contingent consideration was paid in May 2021 based on the achievement of specified operating results following completion of the acquisition. The assets acquired and liabilities assumed were recorded at their estimated fair values. Cash consideration for the acquisition was provided through borrowings under the Companyās credit facilities and cash and cash equivalents on-hand. The consideration transferred for the transaction is summarized as follows: ā ā ā ā ā (In thousands) ā ā ā Cash consideration $ 146,406 Contingent consideration ā 5,000 Consideration transferred ā $ 151,406 ā The following table sets forth the final allocation of the Birch Benders acquisition consideration transferred to the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition. The final October 23, 2020 fair values are as follows: ā ā ā ā ā (In thousands) ā ā ā Accounts receivable, net ā $ 6,184 Inventories ā 13,697 Other current assets ā 129 Property and equipment ā 94 Intangible assets ā 96,300 Other long-term assets ā 11 Accounts payable ā (4,543) Accrued expense and other liabilities ā (2,518) Total assets acquired and liabilities assumed ā 109,354 Goodwill ā 42,052 Total consideration transferred ā $ 151,406 ā The final determination of the fair value of the assets acquired and liabilities assumed was completed during the quarter ended September 25, 2021. Since the initial preliminary estimates reported in the fourth quarter of 2020, the Company has updated certain amounts reflected in the preliminary purchase price allocation, as summarized in the fair values of assets acquired and liabilities assumed as set forth above. Specifically, accounts receivable acquired increased $253 thousand, inventories acquired decreased $167 thousand, other current assets acquired decreased $11 thousand, accounts payable assumed decreased $131 thousand and accrued expenses and other liabilities assumed increased $367 thousand. As a result of these adjustments, goodwill has increased $161 thousand. Measurement period adjustments are recognized in the reporting period in which the adjustments are determined and calculated as if the accounting had been completed at the acquisition date. The final fair value determination of the assets acquired and liabilities assumed was completed prior to one year from the transaction completion, consistent with ASC 805, Business Combinations As a result of the acquisition of the Birch Benders business (the āBirch Benders Acquisitionā), the Company recorded goodwill of $42.1 million. The goodwill recognized includes the fair value of the assembled workforce, which is not recognized as an intangible asset separable from goodwill, and expected synergies gained from the acquisition to generate revenue growth and future market development. The Company determined that the goodwill resulting from the Birch Benders Acquisition is deductible for tax purposes. Intangible assets include the tradename and customer relationships of Birch Benders. Tradename represents the estimated fair value of the acquired entityās name and logo with which the products are associated. The Company estimated the fair value of the tradename using the Multi-Period Excess Earnings Method. Significant assumptions include forecasted brand revenue adjusted to exclude inventory sales, company EBITDA margins, tax depreciation, tax rate, contributory asset charges, and discount rate. Customer relationships represent the estimated fair value of the underlying relationships with the acquired entityās business customers. The Company valued customer relationships using the avoided cost / lost profits method, a form of the income and cost approaches. Significant assumptions include forecast of revenues, cost of sales and operating expenses, and discount rate. The final values assigned to tradename and customer relationships are $90.6 million and $5.7 million, respectively, and are amortized using the straight-line method over the estimated 20-year tradename Intangible Assets, Net |
Revenue Recognition
Revenue Recognition | 9 Months Ended |
Sep. 25, 2021 | |
Revenue Recognition | |
Revenue Recognition | 4. Revenue Recognition Revenue disaggregated by brand is as follows: ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā 13 Weeks Ended ā 39 Weeks Ended (In thousands) September 25, 2021 September 26, 2020 September 25, 2021 September 26, 2020 Raoās ā $ 101,118 ā $ 75,157 ā $ 299,632 ā $ 217,382 Noosa ā 41,712 ā 38,308 ā 124,298 ā 115,002 Michael Angeloās ā 22,090 ā 23,463 ā 59,687 ā 65,952 Birch Benders ā 13,813 ā ā ā 46,325 ā ā Total net sales ā $ 178,733 ā $ 136,928 ā $ 529,942 ā $ 398,336 ā |
Inventories
Inventories | 9 Months Ended |
Sep. 25, 2021 | |
Inventories | |
Inventories | 5. Inventories ā Inventories consisted of the following: ā ā ā ā ā ā ā ā (In thousands) September 25, 2021 December 26, 2020 Finished goods ā $ 49,206 ā $ 27,734 Raw materials and packaging supplies ā 11,071 ā 19,335 Total inventories ā $ 60,277 ā $ 47,069 ā |
Goodwill
Goodwill | 9 Months Ended |
Sep. 25, 2021 | |
Goodwill. | |
Goodwill | 6. Goodwill Changes in the carrying value of Goodwill ā ā ā ā ā (In thousands) ā Goodwill Balance as of December 26, 2020 ā $ 437,290 Purchase accounting adjustments (Note 3) ā 161 Balance as of September 25, 2021 ā $ 437,451 ā The change in Goodwill attributed to the acquisition of a business during the 39 weeks ended September 25, 2021 was the result of measurement period adjustments made to the acquisition method of accounting for the Birch Benders Acquisition as described in Note 3. Business Acquisitions There were no impairment charges related to goodwill during the 13 weeks or 39 weeks ended September 25, 2021 or September 26, 2020. |
Intangible Assets, Net
Intangible Assets, Net | 9 Months Ended |
Sep. 25, 2021 | |
Intangible Assets, Net | |
Intangible Assets, Net | 7. Intangible Assets, Net Intangible asset, net, consisted of the following: ā ā ā ā ā ā ā ā ā ā ā ā ā September 25, 2021 ā ā Gross carrying ā Accumulated ā Net carrying (In thousands) ā amount ā amortization ā amount Intangible assets - definite lives ā ā ā ā Customer relationships ā $ 213,000 ā $ 66,863 ā $ 146,137 Tradename ā 192,347 ā 20,019 ā 172,328 ā ā ā 405,347 ā ā 86,882 ā ā 318,465 Intangible assets - indefinite lives ā ā ā ā Tradename ā ā 153,000 ā ā ā ā ā 153,000 Total intangible assets ā $ 558,347 ā $ 86,882 ā $ 471,465 ā ā ā ā ā ā ā ā ā ā ā ā ā December 26, 2020 ā ā Gross carrying ā Accumulated ā Net carrying (In thousands) amount amortization amount Intangible assets - definite lives ā ā ā ā ā ā Customer relationships ā $ 213,000 ā $ 53,461 ā $ 159,539 Tradename ā 192,347 ā 12,991 ā 179,356 ā ā ā 405,347 ā ā 66,452 ā ā 338,895 Intangible assets - indefinite lives ā ā ā ā ā ā ā ā ā Tradename ā 153,000 ā ā ā ā ā 153,000 Total intangible assets ā $ 558,347 ā $ 66,452 ā $ 491,895 ā Amortization expense related to intangible assets during the 13 weeks ended September 25, 2021 and September 26, 2020 was $6.8 million and $5.6 million, respectively. Amortization expense related to intangible assets during the 39 weeks ended September 25, 2021 and September 26, 2020 was $20.4 million and $16.8 million, respectively. There were no impairment charges related to intangible assets during the 13 weeks or 39 weeks ended September 25, 2021 and September 26, 2020. Estimated total intangible amortization expense during the next five fiscal years and thereafter is as follows: ā ā ā ā ā (In thousands) Amortization Remainder of 2021 ā $ 6,810 2022 ā 27,240 2023 ā 27,240 2024 ā 27,240 2025 ā 27,240 2026 and thereafter ā 202,695 Total ā $ 318,465 ā |
Accrued Expenses
Accrued Expenses | 9 Months Ended |
Sep. 25, 2021 | |
Accrued Expenses | |
Accrued Expenses | 8. Accrued Expenses ā Accrued expenses consisted of the following: ā ā ā ā ā ā ā ā (In thousands) September 25, 2021 December 26, 2020 Accrued trade ā $ 19,686 ā $ 23,010 Accrued general expense ā 23,353 ā 18,275 Accrued compensation and benefits ā 12,696 ā 20,179 Accrued marketing ā 4,679 ā 3,637 Total accrued expenses ā $ 60,414 ā $ 65,101 ā |
Long-term debt
Long-term debt | 9 Months Ended |
Sep. 25, 2021 | |
Long-term debt | |
Long-term debt | 9. Long-Term Debt Long-term debt consisted of the following: ā ā ā ā ā ā ā ā ā ā ā ā ā September 25, 2021 ā ā ā ā ā Unamortized ā ā ā ā ā ā ā ā debt issuance ā ā ā (In thousands) ā Principal ā costs ā Total debt, net Initial First Lien Term Loan Facility $ 580,000 $ (7,985) $ 572,015 Initial Second Lien Facility ā ā 200,000 ā ā (4,308) ā ā 195,692 Revolving Facility ā ā ā ā ā ā Finance lease liabilities ā ā 7,113 ā ā ā ā ā 7,113 Total debt ā $ 787,113 ā $ (12,293) ā 774,820 Less: current portion of long-term debt ā ā ā ā ā ā ā ā 5,800 Less: current portion of finance lease liabilities ā ā ā ā 97 Total long-term debt ā ā ā ā ā $ 768,923 ā ā ā ā ā ā ā ā ā ā ā ā ā December 26, 2020 ā ā ā ā ā Unamortized ā ā ā ā ā ā ā ā debt issuance ā ā ā (In thousands) ā Principal ā costs ā Total debt, net Senior debt $ 374,146 $ (10,282) $ 363,864 Revolver ā ā ā ā ā ā Total debt ā $ 374,146 ā $ (10,282) ā 363,864 Less: current portion of long-term debt ā ā ā ā 3,818 Total long-term debt ā ā ā ā ā $ 360,046 ā ā Senior Debt In November 2018, in conjunction with the acquisition of Noosa, Sovos Intermediate (āBorrowerā) entered into a Credit Facility Agreement with Credit Suisse, Citizens Bank N.A. (āCitizensā), Deutsche Bank, and Aresbank, S.A. (āCredit Agreementā) with a term loan of $280 million (ā2018 Term Loanā) and a revolving line of credit of $45 million (āRevolving Line of Creditā). In accordance with the Credit Agreement, the Company repaid the outstanding 2017 term loan of $158.4 million with Citizens as well as the amount outstanding under the revolving line of credit of $7.0 million. In October 2020, the Company entered into an amendment to its Credit Agreement (āAmended Credit Agreementā). The Amended Credit Agreement provided, among other things, for an additional $100.0 million term loan (the āIncremental Term Loanā) which was part of the same class and had the same terms as the 2018 Term Loan. The Company analyzed the amendment and determined the Incremental Term Loan was not considered a debt modification because the existing 2018 Term Loan was not paid off. The Company paid debt issuance costs related to the Incremental Term Loan of $3.2 million, which were all capitalized. In June 2021, Sovos Intermediate Sovos Intermediate Sovos Intermediate and Second Lien Credit Agreement, the Company repaid the outstanding 2018 Term Loan and Incremental Term Loan of $373.2 million to Credit Suisse and made a restricted payment for the purpose of paying a dividend in the amount of $400.0 million to the direct or indirect equity holders of the Ultimate Parent. See Note 13. Stockholdersā Equity As the debt transaction on the Initial First Lien Term Loan Facility and Initial Second Lien Facility was accounted for as an extinguishment of the old debt, the Company wrote off $9.4 million of the existing 2018 Term Loan and Incremental Term Loan debt issuance costs to expense. The Initial First Lien Term Loan Facility and Initial Second Lien Facility were issued with discounts of $1.5 million and $4.0 million respectively, and the Company paid debt issuance costs of $6.8 million and $0.5 million respectively. The discounts and debt issuance costs paid on the Initial First Lien Term Loan Facility and Initial Second Lien Facility were capitalized. The debt transaction on the Revolving Facility was accounted for as a debt modification. The Company continued to amortize $0.2 million of the existing Revolving Line of Credit debt issuance costs over the new life of the debt, wrote off $0.3 million of the existing Revolving Line of Credit debt issuance costs to expense, and paid $1.1 million in debt issuance costs for the new Revolving Facility, which was capitalized. The amortization of debt issuance costs and discount of $0.5 million and $0.4 million for the 13 weeks ended September 25, 2021 and September 26, 2020, respectively, and $1.6 million and $1.3 million for the 39 weeks ended September 25, 2021 and September 26, 2020, respectively, is included within interest expense in the Condensed Consolidated Statements of Operations. The interest rate for the Initial First Lien Term Loan Facility and Revolving Facility is London Inter-Bank Offered Rate (āLIBO Rateā) plus an applicable rate contingent on the Companyās calculated first lien leverage ratio, ranging from 400 to 425 basis points, and is subject to a 50 basis points reduction, at each level, after the consummation of an initial public offering (as used in this paragraph, an "IPO"). The interest rate for the Initial Second Lien Facility is LIBO Rate plus 8.00% per annum and is subject to a 25 basis points reduction after the consummation of an IPO. In no As of September 25, 2021, the Company had available credit of $125 million under the Revolving Facility, and as of December 26, 2020, the Company had available credit of $45 million under the Revolving Line of Credit. There was zero outstanding on either of the Companyās Revolving Lines of Credit as of September 25, 2021 and December 26, 2020. As of September 25, 2021, the effective interest rate for the Initial First Lien Term Loan Facility and Revolving Facility was 5.00%, and the effective interest rate for the Initial Second Lien Facility was 8.75%. As of December 26, 2020, the effective interest rate for the Incremental Term Loan and the 2018 Term Loan was 5.70%. Loan Covenants In connection with the First Lien Credit Agreement and Second Lien Credit Agreement, the Company has various financial, affirmative, and negative covenants that it must adhere to as specified within the loan agreements. The First Lien Credit Agreement contains a springing financial covenant, which requires the Borrower to maintain a first lien net leverage ratio of consolidated first lien net debt to consolidated EBITDA (with certain adjustments as set forth in the First Lien Credit Agreement) no greater than 6.95 :1.00. Such financial covenant is tested only if outstanding revolving loans (excluding any undrawn letters of credit) minus unrestricted cash exceed 35% of the aggregate revolving credit commitments. The financial covenant is subject to customary āequity cureā rights. In addition, under the First Lien Credit Agreement, an annual excess cashflow calculation is required, to determine if any excess is required to be paid on the Initial First Lien Term Loan Facility. As of September 25, 2021, the Company had no outstanding revolving loans, so did not meet the requirement to test the financial covenant under the First Lien Credit Agreement. As of December 26, 2020, the Company was compliant with its financial covenants under the Amended Credit Agreement, and no cash was required to be paid on the Incremental Term Loan and 2018 Term Loan. Finance Lease Liabilities The Company classifies a lease as a finance lease if the lease term is for a major part, or at least 75%, of the remaining economic life of the underlying asset, or if a lease triggers the present value test or the alternative use test. Prior to the adoption of ASU 2016-02, finance lease liabilities were classified within accrued expenses and other long-term liabilities. See Note 10. Leases Related Party Transactions |
Leases
Leases | 9 Months Ended |
Sep. 25, 2021 | |
Leases | |
Leases | 10. Leases The Company leases real estate in the form of distribution centers, manufacturing facilities, equipment, and office space. Generally, the term for real estate leases ranges from 2 to 10 years at inception of the contract. Generally, the term for equipment leases is 5 years at inception of the contract. Most manufacturing facilities and office space leases include one or more options to renew, with renewal terms that generally can extend the lease term from 2 to 30 years. The exercise of lease renewal options is at the Companyās discretion. Operating and finance lease costs are included within Cost of sales and Selling, general, and administrative expenses in the Condensed Consolidated Statements of Operations. Sublease income was not material for the periods presented. The components of lease expense were as follows: ā ā ā ā ā ā ā ā ā ā ā ā ā ā 13 Weeks Ended ā 39 Weeks Ended (In thousands) ā Statement of Operations Caption ā September 25, 2021 ā September 25, 2021 Operating lease cost: ā ā ā ā Lease cost Cost of sales and Selling, general and administrative ā $ 841 ā $ 2,426 Variable lease cost (1) Cost of sales and Selling, general and administrative ā 356 ā 1,012 Total operating lease cost ā ā 1,197 ā 3,438 ā ā ā ā ā ā ā ā ā Short term lease cost Cost of sales and Selling, general and administrative ā 61 ā 172 ā ā ā ā ā ā ā ā ā Finance lease cost: ā ā ā ā Amortization of right-of-use assets Cost of sales and Selling, general and administrative ā 66 ā 196 Interest on lease liabilities Interest expense ā 133 ā 399 Total finance lease cost ā ā 199 ā 595 ā ā ā ā ā ā ā ā ā Total lease cost ā ā ā $ 1,457 ā $ 4,205 (1) Variable lease cost primarily consists of common area maintenance, utilities, taxes, and insurance. The gross amount of assets and liabilities related to both operating and finance leases were as follows: ā ā ā ā ā ā ā ā (In thousands) ā Balance Sheet Caption ā September 25, 2021 ā Assets ā Operating lease right-of-use assets Operating lease right-of-use assets ā $ 16,267 ā Finance lease right-of-use assets Property and equipment, net ā 6,364 ā Total lease assets ā ā $ 22,631 ā ā ā ā ā ā ā ā Liabilities ā ā Current: ā ā ā ā ā ā Operating lease liabilities ā Operating lease liabilities ā $ 3,176 ā Finance lease liabilities ā Current portion of long-term debt ā ā 97 ā Long-term: ā ā ā ā ā ā Operating lease liabilities Long-term operating lease liabilities ā 18,089 ā Finance lease liabilities Long-term debt, net of debt issuance costs ā 7,016 ā Total lease liabilities ā ā $ 28,378 ā ā The weighted-average remaining lease term and weighted-average discount rate for operating and finance leases at September 25, 2021 were as follows: ā ā ā ā ā ā ā ā Operating Leases Finance Leases Weighted-average remaining lease term (in years) 7.3 34.9 ā Weighted-average discount rate 4.9 % 7.8 % ā Future maturities of lease liabilities as of September 25, 2021 were as follows: ā ā ā ā ā ā ā ā (In thousands) Operating Leases Finance Leases Fiscal year ending: ā ā Remainder of 2021 ā $ 1,066 ā $ 155 2022 ā 4,035 ā 604 2023 ā 4,040 ā 609 2024 ā 3,472 ā 557 2025 ā 2,961 ā 549 Thereafter ā 9,914 ā 19,489 Total lease payments ā 25,488 ā 21,963 Less: Interest ā (4,223) ā (14,850) Present value of lease liabilities ā $ 21,265 ā $ 7,113 ā As of September 25, 2021, the Company did not have any significant additional operating or finance leases that have not yet commenced. Supplemental cash flow and other information related to leases were as follows: ā ā ā ā ā ā 39 Weeks Ended (In thousands) ā September 25, 2021 Cash paid for amounts included in the measurement of lease liabilities ā Operating cash flows from operating leases ā $ 2,883 Operating cash flows from finance leases ā 399 Financing cash flows from finance leases ā ā 49 Right-of-use assets obtained in exchange for new lease liabilities ā ā ā Finance leases ā ā ā Operating leases ā ā 1,638 ā Comparative Information as Reported Under Previous Accounting Standards The following comparative information is reported based upon previous accounting standards in effect for the periods presented. Future minimum payments under lease arrangements with a remaining term in excess of one year as of December 26, 2020 were as follows: ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā Capital Operating Related Party Related Party (In thousands) ā Leases ā Leases ā Capital Lease ā Operating Lease Fiscal Year Ending: ā ā ā ā ā ā ā ā ā ā ā ā 2021 ā $ 105 ā $ 3,783 ā $ 495 ā $ 27 2022 ā 105 ā 3,808 ā 500 ā 27 2023 ā 105 ā 3,813 ā 505 ā 28 2024 ā 48 ā 3,244 ā 510 ā 28 2025 ā 34 ā 2,733 ā 515 ā 28 Thereafter ā ā ā 7,650 ā 19,489 ā 1,065 Total ā $ 397 ā $ 25,031 ā $ 22,014 ā $ 1,203 ā For the 13 weeks and 39 weeks ended September 26, 2020, rent expense for operating leases was $0.8 million and $2.5 million, respectively. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 25, 2021 | |
Commitments and Contingencies. | |
Commitments and Contingencies | 11. Commitments and Contingencies Litigation From time to time, we are subject to various legal actions arising in the ordinary course of our business. We cannot predict with reasonable assurance the outcome of these legal actions brought against us as they are subject to uncertainties. Accordingly, any settlement or resolution in these legal actions may occur and affect our net income (loss) in such period as the settlement or resolution. We do not believe the outcome of any existing legal actions would have a material adverse effect on our consolidated financial statements taken as a whole. Purchase Commitments As of September 25, 2021, the Company had purchase commitments to third-party manufacturers, primarily for materials and supplies used in the manufacture of the Companyās products, for an aggregate of $22.1 million. See Note 16. Related Party Transactions |
Equity-Based Compensation
Equity-Based Compensation | 9 Months Ended |
Sep. 25, 2021 | |
Equity-Based Compensation. | |
Equity-Based Compensation | 12. Equity-Based Compensation Prior to the pricing of the Companyās IPO on September 22, 2021, the employees and certain nonemployees of the Company received equity-based compensation in the form of Incentive Units (āIUsā) of the Ultimate Parent, as consideration for services to the Company. The IUs, which did not have voting rights, were deemed to be equity instruments subject to expense recognition under FASB ASC 718, Compensation ā Stock Compensation. The estimate of fair value of the IUs granted was determined as of the grant date. The fair value of the IUs was estimated using a two-step process. First, the enterprise value of Sovos Brands Holdings, Inc. was established using two generally accepted valuation methodologies: discounted cash flow analysis and guideline comparable public company analysis. Second, the enterprise value was allocated among the securities that comprise the capital structure of Sovos Brands Holdings, Inc. using the Black-Scholes option-pricing model. The use of the Black-Scholes option-pricing model requires the Company to make estimates and assumptions, such as expected volatility, expected term and expected risk-free interest rate. The IUs were held as partnership interests in the Ultimate Parent. In connection with the IPO, the Ultimate Parent distributed its shares of Sovos Brands, Inc. common stock to its limited partners, including holders of IUs, in accordance with the applicable terms of its partnership agreement. Holders of IUs received shares of common stock and restricted common stock of Sovos Brands, Inc. in respect of their IUs. The common stock was distributed with respect to vested IUs and the restricted common stock was distributed with respect to unvested IUs, with the vesting of such restricted common stock tracking the same vesting terms as the related unvested IUs. As of September 25, 2021, 94,646 shares of restricted common stock resulting from the distribution of common stock with respect to unvested time-based IUs vest upon fulfilling time-based service conditions and are scheduled to vest through 2024. As of September 25, 2021, the remaining 3,319,291 shares of restricted common stock resulting from the distribution with respect to unvested performance-based IUs will vest only if certain performance conditions are achieved including exceeding a multiple of invested capital (āMOICā). S to the Ultimate Parent. During the 13 weeks and 39 weeks ended September 25, 2021, the Company recorded equity-based compensation expense of approximately $0.3 million and $1.4 million, respectively, related to the restricted common stock with time-based service vesting conditions. During the 13 weeks and 39 weeks ended September 26, 2020, the Company recorded equity-based compensation expense of approximately $0.5 million and $1.5 million, respectively, related to the IUs with time-based service vesting conditions. ā In connection with the IPO, a change in the vesting of the existing performance-based IUs and accordingly the related distributed restricted stock resulted in a modification to the grants and required the shares to be revalued as of the IPO date, resulting in a modified grant date fair value of approximately $13.0 million. The fair value of the performance-based restricted stock awards was calculated using a Monte Carlo simulation option pricing model estimates and assumptions, such as expected volatility, expected term and expected risk-free interest rate. Specifically, the model revalued the performance units based on the 2.0 2.0 ā The Company recognized approximately $0.7 million of equity-based compensation expense during the 13 weeks ended September 25, 2021 related to the performance-based restricted common stock and will recognize the remaining expense for these awards ratably over the applicable 30-month period. Prior to the distribution of common stock with respect to the performance-based IUs, the performance conditions for the performance-based IUs were not deemed probable of occurrence, and therefore, no compensation cost was recorded for such IUs prior to September 23, 2021. The equity-based compensation expense prior to the IPO was considered to be a transaction with the Ultimate Parent and was classified as a component within additional paid-in capital in the Companyās consolidated statements of changes in stockholderās equity. 2021 Equity Incentive Plan Effective September 21, 2021, the Company approved the 2021 Equity Incentive Plan (the ā2021 Planā) which reserves 9,739,244 shares of common stock. The 2021 Plan provides for the granting of stock options, stock appreciation rights, restricted stock awards, restricted stock units or stock-based awards to eligible employees, consultants and directors. Issuance of Restricted Stock Units In connection with the IPO, and under the 2021 Plan, the Company granted 967,158 time-based restricted stock units (āRSUsā) to certain employees and independent directors. The RSUs include (i) 759,362 RSUs issued to certain employees with each award vesting 100% on the third anniversary of the grant date, subject in general to the applicable employeeās continued service through the vesting date, (ii) 191,130 RSUs issued to certain employees and independent directors with each award vesting in three equal annual installments, subject in general to the employeeās or directorās continued service through the vesting date, and (iii) 16,666 RSUs issued to certain of our independent directors that vest on the earlier of the first anniversary of the grant date and immediately prior to our first annual meeting of stockholders following the IPO, in each case subject to the applicable directorās continued service through the vesting date. Additionally, in connection with the IPO, and under the 2021 Plan, the Company granted 687,690 performance-based restricted stock units (āPSUs) to certain employees with each award vesting subject in general to the achievement of the performance condition and subject to the employeeās continued service through the vesting date. The fair value of the PSUs was estimated using a Monte Carlo simulation option pricing model, which requires the Company to make estimates and assumptions, such as expected volatility, expected term and expected risk-free interest rate. As of September 25, 2021, there was an aggregate of 8,084,396 shares of common stock available for future equity awards under the 2021 Plan . |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Sep. 25, 2021 | |
Stockholders' Equity | |
Stockholders' Equity | 13. Stockholdersā Equity Dividend distribution ā On June 8, 2021, the Company paid a one-time cash dividend to the Ultimate Parent. The total amount of the dividend was $400 million and was recorded against APIC. ā Stock split On September 8, 2021, the Company filed a certificate of amendment to its Certificate of Incorporation (āCertificate of Amendmentā) with the Secretary of State of the State of Delaware. Prior to the effective date of the Certificate of Amendment, the Company was authorized to issue 750,000 shares of common stock at $0.01 par value. As a result of the filing of the Certificate of Amendment, the Company became authorized to issue 500,000,000 shares of common stock at $0.001 par value. P ursuant to the Certificate of Amendment, on September 8, 2021 the Company effected a stock split of its common stock, at a rate of 120.8 -for-1 (the āStock Splitā), accompanied by a corresponding increase in the Company's issued and outstanding shares of common stock . No fractional shares of common stock were issued upon the Stock Split. Any holder of common stock with aggregated shares totaling to fractional shares were rounded up to the nearest whole share. The accompanying consolidated financial statements and related disclosure for periods prior to the Stock Split have been retroactively restated to reflect the filing of the Certificate of Amendment, including the Stock Split. As a result of the Stock Split, the Company had a total of 74,058,447 shares issued and outstanding as of September 8, 2021. In connection with the IPO, on September 22, 2021, the Ultimate Parent distributed its shares of Sovos Brands, Inc. common stock to its limited partners, including holders of IUs, in accordance with the applicable terms of its partnership agreement. Preferred Stock On September 23, 2021, the Company filed an amended and restated certificate of incorporation (āAmended and Restated Charterā) with the Secretary of State of the State of Delaware, which was effective on September 23, 2021 . As a result of the filing of the Amended and Restated Charter, the Company was authorized to issue 510,000,000 shares, divided into two classes as follows: (i) 500,000,000 shares are designated shares of common stock, par value $0.001 per share, and (ii) 10,000,000 shares are designated shares of preferred stock, par value $0.001 per share. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 25, 2021 | |
Income Taxes | |
Income Taxes | 14. Income Taxes The tax expense and the effective tax rate resulting from operations were as follows: ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā 13 Weeks Ended ā 39 Weeks Ended (In thousands) ā September 25, 2021 ā September 26, 2020 ā September 25, 2021 ā September 26, 2020 Income (loss) before income taxes $ (1,117) $ 2,010 ā $ 13,972 $ 16,002 ā Effective income tax (expense) benefit ā $ (3,497) ā $ 226 ā ā $ (8,213) ā $ (4,698) ā Effective tax rate ā 313.1 % 11.2 % ā 58.8 % 29.4 % ā The effective tax rates for the 13 weeks and 39 weeks ended September 25, 2021 and September 26, 2020 differ from the statutory United States federal income and state and local income tax rates primarily due to nondeductible stock-based compensation, limitation on the deduction of executive compensation for public companies, and costs associated with the IPO that require capitalization for federal income tax purposes. The Companyās effective tax rate may increase or decrease with changes in, among other things, the amount of income or loss by jurisdiction, changes in tax law, and the movement of liabilities established pursuant to accounting guidance for unrecognized tax benefits as statutes of limitations expire, positions are effectively settled, or when additional information becomes available. Significant unusual or infrequently occurring items are excluded from the estimated annual effective tax rate and recognized in the interim period in which the transaction arises. For the 39 weeks ended September 25, 2021, the Company excluded the $9.7 million of debt extinguishment costs in the calculation of the effective tax rate. For the 13 weeks ended September 25, 2021 and the 13 weeks and 39 weeks ended September 26, 2020, there were no significant unusual or infrequent items excluded in the calculation of the effective tax rate. Proposed or pending tax law changes in the various jurisdictions in which we do business may have an impact on our effective tax rate and will be reflected as such in the period of enactment. Based upon the mix and timing of the Companyās actual annual earnings or loss compared to annual projections, as well as changes in the factors noted above, the Companyās effective tax rate may vary quarterly and may make quarterly comparisons not meaningful. |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 9 Months Ended |
Sep. 25, 2021 | |
Fair Value of Financial Instruments | |
Fair Value of Financial Instruments | 15. Fair Value of Financial Instruments ASC 820, Fair Value Measurements and Disclosures (āASC 820ā), defines fair value as the price that would be received for an asset, or paid to transfer a liability, in an orderly transaction between market participants on the measurement date, and establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value as follows: Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and Level 3: inputs for the asset or liability that are based on unobservable inputs in which there is little or no market data. Cash and cash equivalents, accounts receivable, prepaid expenses, accounts payable and accrued expenses are reflected in the Condensed Consolidated Balance Sheets at carrying value, which approximates fair value due to the short-term nature of these instruments. The Companyās borrowing instruments are recorded at their carrying values in the Condensed Consolidated Balance Sheets, which may differ from their respective fair values. The carrying values and estimated fair values of the Companyās senior debt and revolver approximate their carrying values as of September 25, 2021 and December 26, 2020, based on interest rates currently available to the Company for similar borrowings. There were no transfers of financial instruments between the three levels of fair value hierarchy during the 39 weeks ended September 25, 2021 and the fiscal year ended December 26, 2020. |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Sep. 25, 2021 | |
Related Party Transactions | |
Related Party Transactions | 16. Related Party Transactions The Company has two related party leases for a manufacturing facility and land. The facility and land are leased from Morning Fresh Dairy (āMorning Freshā), a related party entity owned and controlled by a board member of the Company and major equity holder of the Ultimate Parent. The facility lease and land lease are classified as a finance lease and operating lease, respectively, based on the original lease term and reasonably certain renewal options. As of September 25, 2021, the facility has a lease liability balance of $6.8 million which is primarily recognized as long-term debt in our Condensed Consolidated Balance Sheets. As of September 25, 2021, the land lease has a liability balance of $0.5 million which is primarily recognized as long-term operating lease liabilities in our Condensed Consolidated Balance Sheets. The facility and land lease contained total payments of approximately $144 thousand and $120 thousand for the 13 weeks ended September 25, 2021 and September 26, 2020, respectively, and $393 thousand and $361 thousand for the 39 weeks ended September 25, 2021 and September 26, 2020, respectively. Morning Fresh regularly purchases finished goods inventory from the Company for sale to its customers. Additionally, Morning Fresh regularly supplies milk used in the Companyās manufacturing process. Sales to and purchases from Morning Fresh were as follows: ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā 13 Weeks Ended 39 Weeks Ended (In thousands) ā September 25, 2021 ā September 26, 2020 ā September 25, 2021 ā September 26, 2020 Sales ā $ 122 ā $ 112 ā $ 357 ā $ 329 Purchases ā $ 1,468 ā $ 1,186 ā $ 4,309 ā $ 3,792 ā Amounts outstanding in respect to Morning Fresh transactions were as follows: ā ā ā ā ā ā ā ā (In thousands) September 25, 2021 December 26, 2020 Receivables ā $ 34 ā $ 66 Payables ā $ 666 ā $ 503 ā The Company has a milk supply agreement with Morning Fresh for a base term ending December 31, 2027, with the option available for extension for a total of fifteen additional 2-year periods to December 31, 2057. Four yearsā advance written notice is required to terminate the agreement. Milk will be priced on a month-to-month basis by USDA Central Federal Order No. 32 for Class II milk, plus surcharges and premiums, provided that the final price of the milk shall be 23.24 cents per hundred weight less than the published Dairy Farmers of America bill for that month. The Company will accept up to 3,650,000 gallons as determined by Morning Fresh in 2020, and for each year of the term thereafter. As of September 25, 2021, the Company has future commitments to purchase approximately $33.9 million of milk from Morning Fresh, approximated at current market price. In addition, the Company has agreed to pay an additional $33 thousand monthly through December 31, 2027 to cover the landownerās incremental costs relating to capital improvements necessary to support increased milk production required by the Company over the term of this agreement. If the agreement is terminated before December 1, 2027, the Company will be required to pay an early termination penalty, which declines from $3.0 million at the inception of the agreement to $0 over the ten-year term, based on an amortization table outlined in the agreement. In January 2019, the Company entered into an agreement with a stockholder, to sell and issue 5,217 Class A units in exchange for a $6 million stockholder note receivable, which was recorded within stockholdersā equity. In accordance with the agreement, interest on the note accrued and compounded quarterly at a rate equal to the long-term applicable federal rate per annum on date of issuance on the unpaid principal amount of the note. The federal rate used on the date of issuance was the January 2019 long-term applicable federal rates for purposes of IRC 1274(d), which was 3.12%. On February 26, 2021, the stockholder note receivable plus accrued and unpaid interest was paid in full in the amount of $6.4 million. Advent International Corporation (āAdventā or āour Sponsorā) is a private equity firm which has invested funds in the Ultimate Parent. Although no individual fund owns a controlling interest in us, together the funds represent our current majority owners. Our Sponsor and its affiliates have ownership interests in a broad range of companies. We have entered and may in the future enter into commercial transactions in the ordinary course of our business with some of these companies, including the sale of goods and services and the purchase of goods and services. During the 13 weeks and 39 weeks ended September 25, 2021 and the 13 weeks and 39 weeks ended September 26, 2020, our Sponsor held an interest in Fort Dearborn Company (āFort Dearbornā), a supplier of packaging labels. Purchases of labels from Fort Dearborn were $0.2 million and $1.5 million for the 13 weeks and 39 weeks ended September 25, 2021, respectively and $0.7 million and $1.3 million for the 13 weeks and 39 weeks ended September 26, 2020, respectively. |
Earnings Per Share
Earnings Per Share | 9 Months Ended |
Sep. 25, 2021 | |
Earnings Per Share | |
Earnings Per Share | 17. Earnings Per Share Basic and diluted earnings (loss) per share (āEPSā) were as follows: ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā 13 Weeks Ended ā 39 Weeks Ended (In thousands, except share and per share amounts) September 25, 2021 September 26, 2020 September 25, 2021 September 26, 2020 Net income (loss) ā $ (4,614) ā $ 2,236 ā $ 5,759 ā $ 11,304 Basic ā ā ā ā ā ā Weighted average basic common shares outstanding ā 74,058,447 ā ā 74,058,719 ā ā 74,058,447 ā ā 74,058,644 Basic earnings (loss) per share ā $ (0.06) ā $ 0.03 ā $ 0.08 ā $ 0.15 Diluted ā ā ā ā ā ā Weighted average diluted common shares outstanding ā 74,058,447 ā ā 76,394,135 ā ā 74,058,453 ā ā 76,259,190 Diluted earnings (loss) per share ā $ (0.06) ā $ 0.03 ā $ 0.08 ā $ 0.15 ā EPS calculations for the 13 weeks ended September 25, 2021 excluded 61 shares that would have been anti-dilutive due to the net loss for the period. ā There were no anti-dilutive shares for the EPS calculations for the 39 weeks ended September 25, 2021 and the 13 weeks and 39 weeks ended September 26, 2020, respectively. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 25, 2021 | |
Subsequent Events | |
Subsequent Events | 18. Subsequent Events ā The Company ā Organizational Transactions and IPO ā On September 27, 2021, the Company closed its IPO of 23,334,000 shares of common stock, $0.001 par value per share, at an offering price of $12.00 per share, and received net proceeds from the IPO of approximately $263.2 million, net of $16.8 million in underwriting discounts and commissions. ā Subsequent to the IPO, the underwriters exercised their option to purchase an additional 3,500,100 shares of common stock. The Company closed its sale of such additional shares on October 5, 2021, resulting in net proceeds of approximately $39.5 million, net of $2.5 million in underwriting discounts and commissions. ā As a result of the IPO and the exercise of the underwritersā option to purchase additional shares, the new investors in the Company own 26,834,100 shares of the common stock, or approximately 26.6% of the total 100,892,547 shares of common stock outstanding as of November 9, 2021. ā Long-Term Debt On September 27, 2021, using net proceeds of the IPO, the Company paid the full outstanding principal balance on the Initial Second Lien Facility of $200.0 million plus accrued interest of approximately $2.9 million. Upon the full prepayment of the Initial Second Lien Facility, the Company recognized a loss on the loan extinguishment resulting in a write-off of $4.3 million of the related unamortized issuance costs and discounts. Additionally, on September 29, 2021, and October 8, 2021, the Company prepaid $59.7 million and $39.5 million, respectively, of the outstanding principal balance under the Initial First Lien Term Loan Facility, plus total accrued interest of approximately $0.9 million. Upon the partial prepayment of the Initial First Lien Term Loan Facility, the Company recognized a $1.4 million proportional loss on the partial extinguishment of the related unamortized issuance costs and discounts. The remaining principal balance on the Initial First Lien Term Loan Facility, after the $59.7 million and $39.5 million prepayments, is $480.8 million. The Company has directed Credit Suisse to apply the prepayments against future scheduled principal installments, which eliminates all future principal payments for the remaining term of the loan. As of September 27, 2021, the closing date of the IPO, the interest rate on the Initial First Lien Term Loan Facility and Revolving Facility decreased 50 basis points, from an effective rate of 5.00% to 4.50%. ā Equity-Based Compensation On November 4, 2021, the Company and the Limited Partnership modified a portion of the existing equity-based compensation awards dated September 22, 2021 among the Company, Limited Partnership and the holders of such restricted stock. As a result of these modifications, a portion of the shares that would have vested based upon a 4.0 ā ā ā ā ā ā ā |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 25, 2021 | |
Summary of Significant Accounting Policies | |
Dividends Paid | Dividends Paid The Company does not have an established dividend policy. The Companyās board of directors (the āBoardā) has sole authority to determine if and when dividends will be declared and on what terms. Dividend payments, if any, depend on the Companyās earnings, capital requirements, financial condition, excess availability under the Companyās lines of credit, market and economic conditions, and other factors considered relevant. The Company will record all dividends as a reduction to additional paid-in capital ("APIC"). Once APIC is reduced to zero, dividends will be recorded against retained earnings or accumulated deficit. See Note 13. Stockholdersā Equity |
Leasing Arrangements | Leasing Arrangements Effective December 27, 2020, the Company adopted Accounting Standards Update 2016-02 (ASU 2016-02) which created a new topic, ASC 842 āLeases.ā Subsequent to the issuance of ASU 2016-02, ASC 842 has been amended by various updates that amended and clarified the implementation of the standard. In accordance with ASC 842, the Company, at the inception of the contract, determines whether a contract is or contains a lease. The Company records right-of-use assets and lease obligations for its finance and operating leases with a term greater than 12 months, which are initially recognized based on the discounted future minimum lease payments over the term of the lease. The Company has elected the short-term practical expedient for short-term leases with an initial term of 12 months or less. As a result, the Company does not apply balance sheet recognition for these short-term leases and records aggregated lease expense. The Company uses the implicit rate in the lease, if available, for calculating the present value of the lease payments. If the implicit rate is not readily determinable, the Company will use the applicable incremental borrowing rate in calculating the present value of the sum of the lease payments. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease. The Company evaluates renewal options at lease inception and on an ongoing basis and includes renewal options that it is reasonably certain to exercise in its expected lease terms when classifying leases and measuring lease liabilities. Some leases also include early termination options, which can be exercised under specific conditions. Additionally, certain leases contain incentives, such as construction allowances from landlords. These incentives reduce the right-of-use asset related to the lease. The Company recognizes expense for operating leases on a straight-line basis over the lease term. The Company recognizes interest expense and depreciation expense for finance leases. Depreciation expense for assets held under finance leases are computed using the straight-line method over the lease term or useful life for leases that contain a transfer of title or reasonably certain purchase option. The Company elected to combine lease and non-lease components for all asset classes. The Companyās lease agreements may contain variable lease payments for increases in rental payment as a result of indexation and variable storage and shipping utilization, common area maintenance, property tax, and utility charges, which are excluded from the measurement of its right-of-use assets and lease liabilities and are recognized as variable payments in the period in which the obligation for those payments is incurred. The Companyās real estate leases include base rent escalation clauses. The majority of these are based on the change in a local consumer price or similar inflation index. Payments that may vary based on an index or rate are included in the measurement of our right-of-use assets and lease liabilities at the rate as of the commencement date with any subsequent changes to those payments being recognized as variable payments in the period in which they occur. The Company does not have significant residual value guarantees or restrictive covenants in the lease portfolio. See Note 10. Leases |
New Accounting Pronouncements and Policies | New Accounting Pronouncements and Policies Recently Adopted Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) The Company early adopted ASU 2016-02 and all associated amendments on the first day of fiscal year 2021 (December 27, 2020) which includes, as allowed under ASU 2018-11, the ability to recognize a cumulative-effect adjustment through opening accumulated deficit as of the date of adoption. The Company elected the package of practical expedients permitted under the transition guidance, which allows the Company to carryforward its historical assessments of: (1) whether contracts are, or contain, leases, (2) lease classification and (3) initial direct costs. The Company did not elect the hindsight practical expedient. The Company elected a policy of not recording leases on its Condensed Consolidated Balance Sheets when the leases have a term of 12 months or less and the Company is not reasonably certain to elect an option to renew the leased asset. Due to the adoption of this guidance, the Company recognized operating right-of-use assets and operating lease liabilities of $16.3 million and $21.7 million, respectively, on the Condensed Consolidated Balance Sheets as of the date of adoption. The difference between the right-of-use assets and lease liabilities is primarily due to the accrual for lease payments as a result of straight-line lease expense and unamortized tenant incentive liability balances. There was no impact to opening accumulated deficit as a result of the adoption of the guidance. The adoption of this new guidance did not have a material impact on the Companyās results of operations, cash flows, and liquidity, and did not have a material impact on the Companyās covenant compliance under its existing credit agreement. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments ā Credit Losses (Topic 326) ā Measurement of Credit Losses on Financial Instruments In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes In October 2020, the FASB issued ASU No. 2020-10, Codification Improvements, which provides updates for technical corrections, clarifications to guidance, simplifications to wording or structure of guidance, and other minor improvements across various areas of accounting within GAAP. This ASU is effective for all entities for fiscal years beginning after December 15, 2020. The amendments of this ASU should be applied retrospectively. The Company adopted this standard effective December 27, 2020 and the adoption of the standard did not have a material impact on its consolidated financial statements or result in any retrospective changes. Recently Issued Accounting Pronouncements Not Yet Adopted In March 2020, the Financial Accounting Standards Board (the āFASBā) issued Accounting Standards Update (āASUā) No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. Reference Rate Reform (Topic 848) |
Business Acquisitions (Tables)
Business Acquisitions (Tables) | 9 Months Ended |
Sep. 25, 2021 | |
Business Acquisitions | |
Schedule of consideration transferred | ā ā ā ā ā (In thousands) ā ā ā Cash consideration $ 146,406 Contingent consideration ā 5,000 Consideration transferred ā $ 151,406 |
Schedule of estimated fair value of assets acquired and liabilities assumed | ā ā ā ā ā (In thousands) ā ā ā Accounts receivable, net ā $ 6,184 Inventories ā 13,697 Other current assets ā 129 Property and equipment ā 94 Intangible assets ā 96,300 Other long-term assets ā 11 Accounts payable ā (4,543) Accrued expense and other liabilities ā (2,518) Total assets acquired and liabilities assumed ā 109,354 Goodwill ā 42,052 Total consideration transferred ā $ 151,406 |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 9 Months Ended |
Sep. 25, 2021 | |
Revenue Recognition | |
Schedule of revenue disaggregated | ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā 13 Weeks Ended ā 39 Weeks Ended (In thousands) September 25, 2021 September 26, 2020 September 25, 2021 September 26, 2020 Raoās ā $ 101,118 ā $ 75,157 ā $ 299,632 ā $ 217,382 Noosa ā 41,712 ā 38,308 ā 124,298 ā 115,002 Michael Angeloās ā 22,090 ā 23,463 ā 59,687 ā 65,952 Birch Benders ā 13,813 ā ā ā 46,325 ā ā Total net sales ā $ 178,733 ā $ 136,928 ā $ 529,942 ā $ 398,336 |
Inventories (Tables)
Inventories (Tables) | 9 Months Ended |
Sep. 25, 2021 | |
Inventories | |
Schedule of inventories | ā ā ā ā ā ā ā ā (In thousands) September 25, 2021 December 26, 2020 Finished goods ā $ 49,206 ā $ 27,734 Raw materials and packaging supplies ā 11,071 ā 19,335 Total inventories ā $ 60,277 ā $ 47,069 |
Goodwill (Tables)
Goodwill (Tables) | 9 Months Ended |
Sep. 25, 2021 | |
Goodwill. | |
Schedule of Goodwill | ā ā ā ā ā (In thousands) ā Goodwill Balance as of December 26, 2020 ā $ 437,290 Purchase accounting adjustments (Note 3) ā 161 Balance as of September 25, 2021 ā $ 437,451 |
Intangible Assets, Net (Tables)
Intangible Assets, Net (Tables) | 9 Months Ended |
Sep. 25, 2021 | |
Intangible Assets, Net | |
Schedule of intangible assets net | ā ā ā ā ā ā ā ā ā ā ā ā ā September 25, 2021 ā ā Gross carrying ā Accumulated ā Net carrying (In thousands) ā amount ā amortization ā amount Intangible assets - definite lives ā ā ā ā Customer relationships ā $ 213,000 ā $ 66,863 ā $ 146,137 Tradename ā 192,347 ā 20,019 ā 172,328 ā ā ā 405,347 ā ā 86,882 ā ā 318,465 Intangible assets - indefinite lives ā ā ā ā Tradename ā ā 153,000 ā ā ā ā ā 153,000 Total intangible assets ā $ 558,347 ā $ 86,882 ā $ 471,465 ā ā ā ā ā ā ā ā ā ā ā ā ā December 26, 2020 ā ā Gross carrying ā Accumulated ā Net carrying (In thousands) amount amortization amount Intangible assets - definite lives ā ā ā ā ā ā Customer relationships ā $ 213,000 ā $ 53,461 ā $ 159,539 Tradename ā 192,347 ā 12,991 ā 179,356 ā ā ā 405,347 ā ā 66,452 ā ā 338,895 Intangible assets - indefinite lives ā ā ā ā ā ā ā ā ā Tradename ā 153,000 ā ā ā ā ā 153,000 Total intangible assets ā $ 558,347 ā $ 66,452 ā $ 491,895 |
Schedule of amortization expenses intangible assets net | ā ā ā ā ā (In thousands) Amortization Remainder of 2021 ā $ 6,810 2022 ā 27,240 2023 ā 27,240 2024 ā 27,240 2025 ā 27,240 2026 and thereafter ā 202,695 Total ā $ 318,465 |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 9 Months Ended |
Sep. 25, 2021 | |
Accrued Expenses | |
Schedule of Accrued Expenses | ā ā ā ā ā ā ā ā (In thousands) September 25, 2021 December 26, 2020 Accrued trade ā $ 19,686 ā $ 23,010 Accrued general expense ā 23,353 ā 18,275 Accrued compensation and benefits ā 12,696 ā 20,179 Accrued marketing ā 4,679 ā 3,637 Total accrued expenses ā $ 60,414 ā $ 65,101 |
Long-term debt (Tables)
Long-term debt (Tables) | 9 Months Ended |
Sep. 25, 2021 | |
Long-term debt | |
Schedule of Long-term debt | ā ā ā ā ā ā ā ā ā ā ā ā ā September 25, 2021 ā ā ā ā ā Unamortized ā ā ā ā ā ā ā ā debt issuance ā ā ā (In thousands) ā Principal ā costs ā Total debt, net Initial First Lien Term Loan Facility $ 580,000 $ (7,985) $ 572,015 Initial Second Lien Facility ā ā 200,000 ā ā (4,308) ā ā 195,692 Revolving Facility ā ā ā ā ā ā Finance lease liabilities ā ā 7,113 ā ā ā ā ā 7,113 Total debt ā $ 787,113 ā $ (12,293) ā 774,820 Less: current portion of long-term debt ā ā ā ā ā ā ā ā 5,800 Less: current portion of finance lease liabilities ā ā ā ā 97 Total long-term debt ā ā ā ā ā $ 768,923 ā ā ā ā ā ā ā ā ā ā ā ā ā December 26, 2020 ā ā ā ā ā Unamortized ā ā ā ā ā ā ā ā debt issuance ā ā ā (In thousands) ā Principal ā costs ā Total debt, net Senior debt $ 374,146 $ (10,282) $ 363,864 Revolver ā ā ā ā ā ā Total debt ā $ 374,146 ā $ (10,282) ā 363,864 Less: current portion of long-term debt ā ā ā ā 3,818 Total long-term debt ā ā ā ā ā $ 360,046 ā |
Leases (Tables)
Leases (Tables) | 9 Months Ended |
Sep. 25, 2021 | |
Leases | |
Schedule of components of lease expenses | ā ā ā ā ā ā ā ā ā ā ā ā ā ā 13 Weeks Ended ā 39 Weeks Ended (In thousands) ā Statement of Operations Caption ā September 25, 2021 ā September 25, 2021 Operating lease cost: ā ā ā ā Lease cost Cost of sales and Selling, general and administrative ā $ 841 ā $ 2,426 Variable lease cost (1) Cost of sales and Selling, general and administrative ā 356 ā 1,012 Total operating lease cost ā ā 1,197 ā 3,438 ā ā ā ā ā ā ā ā ā Short term lease cost Cost of sales and Selling, general and administrative ā 61 ā 172 ā ā ā ā ā ā ā ā ā Finance lease cost: ā ā ā ā Amortization of right-of-use assets Cost of sales and Selling, general and administrative ā 66 ā 196 Interest on lease liabilities Interest expense ā 133 ā 399 Total finance lease cost ā ā 199 ā 595 ā ā ā ā ā ā ā ā ā Total lease cost ā ā ā $ 1,457 ā $ 4,205 (1) Variable lease cost primarily consists of common area maintenance, utilities, taxes, and insurance. ā ā ā ā ā ā ā ā (In thousands) ā Balance Sheet Caption ā September 25, 2021 ā Assets ā Operating lease right-of-use assets Operating lease right-of-use assets ā $ 16,267 ā Finance lease right-of-use assets Property and equipment, net ā 6,364 ā Total lease assets ā ā $ 22,631 ā ā ā ā ā ā ā ā Liabilities ā ā Current: ā ā ā ā ā ā Operating lease liabilities ā Operating lease liabilities ā $ 3,176 ā Finance lease liabilities ā Current portion of long-term debt ā ā 97 ā Long-term: ā ā ā ā ā ā Operating lease liabilities Long-term operating lease liabilities ā 18,089 ā Finance lease liabilities Long-term debt, net of debt issuance costs ā 7,016 ā Total lease liabilities ā ā $ 28,378 ā ā ā ā ā ā ā ā ā Operating Leases Finance Leases Weighted-average remaining lease term (in years) 7.3 34.9 ā Weighted-average discount rate 4.9 % 7.8 % ā ā ā ā ā ā 39 Weeks Ended (In thousands) ā September 25, 2021 Cash paid for amounts included in the measurement of lease liabilities ā Operating cash flows from operating leases ā $ 2,883 Operating cash flows from finance leases ā 399 Financing cash flows from finance leases ā ā 49 Right-of-use assets obtained in exchange for new lease liabilities ā ā ā Finance leases ā ā ā Operating leases ā ā 1,638 |
Schedule of Future minimum lease payments of operating leases | Future maturities of lease liabilities as of September 25, 2021 were as follows: ā ā ā ā ā ā ā ā (In thousands) Operating Leases Finance Leases Fiscal year ending: ā ā Remainder of 2021 ā $ 1,066 ā $ 155 2022 ā 4,035 ā 604 2023 ā 4,040 ā 609 2024 ā 3,472 ā 557 2025 ā 2,961 ā 549 Thereafter ā 9,914 ā 19,489 Total lease payments ā 25,488 ā 21,963 Less: Interest ā (4,223) ā (14,850) Present value of lease liabilities ā $ 21,265 ā $ 7,113 ā |
Schedule of Future minimum lease payments of finance leases | ā ā ā ā ā ā ā ā (In thousands) Operating Leases Finance Leases Fiscal year ending: ā ā Remainder of 2021 ā $ 1,066 ā $ 155 2022 ā 4,035 ā 604 2023 ā 4,040 ā 609 2024 ā 3,472 ā 557 2025 ā 2,961 ā 549 Thereafter ā 9,914 ā 19,489 Total lease payments ā 25,488 ā 21,963 Less: Interest ā (4,223) ā (14,850) Present value of lease liabilities ā $ 21,265 ā $ 7,113 |
Future minimum payments under lease arrangements under ASU 840 - Capital leases | Future minimum payments under lease arrangements with a remaining term in excess of one year as of December 26, 2020 were as follows: ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā Capital Operating Related Party Related Party (In thousands) ā Leases ā Leases ā Capital Lease ā Operating Lease Fiscal Year Ending: ā ā ā ā ā ā ā ā ā ā ā ā 2021 ā $ 105 ā $ 3,783 ā $ 495 ā $ 27 2022 ā 105 ā 3,808 ā 500 ā 27 2023 ā 105 ā 3,813 ā 505 ā 28 2024 ā 48 ā 3,244 ā 510 ā 28 2025 ā 34 ā 2,733 ā 515 ā 28 Thereafter ā ā ā 7,650 ā 19,489 ā 1,065 Total ā $ 397 ā $ 25,031 ā $ 22,014 ā $ 1,203 ā |
Future minimum payments under lease arrangements under ASU 840 - Operating leases | ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā Capital Operating Related Party Related Party (In thousands) ā Leases ā Leases ā Capital Lease ā Operating Lease Fiscal Year Ending: ā ā ā ā ā ā ā ā ā ā ā ā 2021 ā $ 105 ā $ 3,783 ā $ 495 ā $ 27 2022 ā 105 ā 3,808 ā 500 ā 27 2023 ā 105 ā 3,813 ā 505 ā 28 2024 ā 48 ā 3,244 ā 510 ā 28 2025 ā 34 ā 2,733 ā 515 ā 28 Thereafter ā ā ā 7,650 ā 19,489 ā 1,065 Total ā $ 397 ā $ 25,031 ā $ 22,014 ā $ 1,203 |
Income Taxes (Tables)
Income Taxes (Tables) | 9 Months Ended |
Sep. 25, 2021 | |
Income Taxes | |
Schedule of tax expense and the effective tax rate | ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā 13 Weeks Ended ā 39 Weeks Ended (In thousands) ā September 25, 2021 ā September 26, 2020 ā September 25, 2021 ā September 26, 2020 Income (loss) before income taxes $ (1,117) $ 2,010 ā $ 13,972 $ 16,002 ā Effective income tax (expense) benefit ā $ (3,497) ā $ 226 ā ā $ (8,213) ā $ (4,698) ā Effective tax rate ā 313.1 % 11.2 % ā 58.8 % 29.4 % |
Related Party Transactions (Tab
Related Party Transactions (Tables) | 9 Months Ended |
Sep. 25, 2021 | |
Related Party Transactions | |
Schedule of transactions with related party | ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā 13 Weeks Ended 39 Weeks Ended (In thousands) ā September 25, 2021 ā September 26, 2020 ā September 25, 2021 ā September 26, 2020 Sales ā $ 122 ā $ 112 ā $ 357 ā $ 329 Purchases ā $ 1,468 ā $ 1,186 ā $ 4,309 ā $ 3,792 ā ā ā ā ā ā ā ā (In thousands) September 25, 2021 December 26, 2020 Receivables ā $ 34 ā $ 66 Payables ā $ 666 ā $ 503 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 9 Months Ended |
Sep. 25, 2021 | |
Earnings Per Share | |
Schedule of Basic and diluted earnings (loss) per share | ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā 13 Weeks Ended ā 39 Weeks Ended (In thousands, except share and per share amounts) September 25, 2021 September 26, 2020 September 25, 2021 September 26, 2020 Net income (loss) ā $ (4,614) ā $ 2,236 ā $ 5,759 ā $ 11,304 Basic ā ā ā ā ā ā Weighted average basic common shares outstanding ā 74,058,447 ā ā 74,058,719 ā ā 74,058,447 ā ā 74,058,644 Basic earnings (loss) per share ā $ (0.06) ā $ 0.03 ā $ 0.08 ā $ 0.15 Diluted ā ā ā ā ā ā Weighted average diluted common shares outstanding ā 74,058,447 ā ā 76,394,135 ā ā 74,058,453 ā ā 76,259,190 Diluted earnings (loss) per share ā $ (0.06) ā $ 0.03 ā $ 0.08 ā $ 0.15 |
Company Overview (Details)
Company Overview (Details) $ / shares in Units, $ in Millions | Nov. 09, 2021shares | Oct. 05, 2021USD ($)shares | Sep. 27, 2021USD ($)$ / sharesshares | Sep. 22, 2021$ / sharesshares | Sep. 25, 2021subsidiary$ / shares | Sep. 23, 2021$ / shares | Sep. 08, 2021$ / shares | Sep. 07, 2021$ / shares | Dec. 26, 2020$ / shares |
Consolidation, Wholly Owned Subsidiary, Parent Ownership Interest [Line Items] | |||||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.001 | $ 0.001 | $ 0.001 | $ 0.01 | $ 0.001 | ||||
Subsequent Event | |||||||||
Consolidation, Wholly Owned Subsidiary, Parent Ownership Interest [Line Items] | |||||||||
Common stock issued (in shares) | shares | 26,834,100 | ||||||||
IPO | |||||||||
Consolidation, Wholly Owned Subsidiary, Parent Ownership Interest [Line Items] | |||||||||
Common stock issued (in shares) | shares | 23,334,000 | ||||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.001 | ||||||||
Offering price (in dollar per share) | $ / shares | $ 12 | ||||||||
IPO | Subsequent Event | |||||||||
Consolidation, Wholly Owned Subsidiary, Parent Ownership Interest [Line Items] | |||||||||
Common stock issued (in shares) | shares | 23,334,000 | ||||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.001 | ||||||||
Offering price (in dollar per share) | $ / shares | $ 12 | ||||||||
Net proceeds | $ | $ 263.2 | ||||||||
Underwriting discounts and commissions | $ | $ 16.8 | ||||||||
Over-Allotment Option | |||||||||
Consolidation, Wholly Owned Subsidiary, Parent Ownership Interest [Line Items] | |||||||||
Common stock issued (in shares) | shares | 3,500,100 | ||||||||
Over-Allotment Option | Subsequent Event | |||||||||
Consolidation, Wholly Owned Subsidiary, Parent Ownership Interest [Line Items] | |||||||||
Common stock issued (in shares) | shares | 3,500,100 | 3,500,100 | |||||||
Net proceeds | $ | $ 39.5 | ||||||||
Underwriting discounts and commissions | $ | $ 2.5 | ||||||||
Sovos Brands Holdings, Inc | |||||||||
Consolidation, Wholly Owned Subsidiary, Parent Ownership Interest [Line Items] | |||||||||
Ownership percentage | 100.00% | ||||||||
Sovos Brands Limited Partnership | Sovos Brands, Inc | |||||||||
Consolidation, Wholly Owned Subsidiary, Parent Ownership Interest [Line Items] | |||||||||
Ownership percentage | 100.00% | ||||||||
Sovos Brands Holdings, Inc | Sovos Brands Intermediate, Inc. | |||||||||
Consolidation, Wholly Owned Subsidiary, Parent Ownership Interest [Line Items] | |||||||||
Ownership percentage | 100.00% | ||||||||
Sovos Brands Intermediate, Inc. | |||||||||
Consolidation, Wholly Owned Subsidiary, Parent Ownership Interest [Line Items] | |||||||||
Number of subsidiaries | subsidiary | 4 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Details) $ in Thousands | Sep. 25, 2021USD ($) |
Summary of Significant Accounting Policies | |
Operating lease right-of-use assets | $ 16,267 |
Operating lease liabilities | $ 21,265 |
ASU 2016-02 | |
Summary of Significant Accounting Policies | |
Change in Accounting Principle, Accounting Standards Update, Early Adoption [true false] | true |
Operating lease right-of-use assets | $ 16,300 |
Operating lease liabilities | $ 21,700 |
Business Acquisitions - Conside
Business Acquisitions - Consideration transferred (Details) - Birch Benders - USD ($) $ in Thousands | Oct. 23, 2020 | Sep. 25, 2021 |
Business Acquisitions | ||
Ownership interest acquired (as a percent) | 100.00% | |
Cash consideration | $ 146,406 | |
Contingent consideration | 5,000 | |
Consideration transferred | $ 151,406 | $ 151,400 |
Business Acquisitions - Prelimi
Business Acquisitions - Preliminary fair value (Details) - USD ($) $ in Thousands | Sep. 25, 2021 | Dec. 26, 2020 | Oct. 23, 2020 |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net [Abstract] | |||
Goodwill | $ 437,451 | $ 437,290 | |
Birch Benders | |||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net [Abstract] | |||
Accounts receivable, net | $ 6,184 | ||
Inventories | 13,697 | ||
Other current assets | 129 | ||
Property and equipment | 94 | ||
Intangible assets | 96,300 | ||
Other long-term assets | 11 | ||
Accounts payable | (4,543) | ||
Accrued expense and other liabilities | (2,518) | ||
Total assets acquired and liabilities assumed | 109,354 | ||
Goodwill | $ 42,100 | 42,052 | |
Total consideration transferred | $ 151,406 |
Business Acquisitions (Details)
Business Acquisitions (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 25, 2021 | Sep. 25, 2021 | Dec. 26, 2020 | Oct. 23, 2020 | |
Business Acquisitions | ||||
Goodwill | $ 437,451 | $ 437,451 | $ 437,290 | |
Intangible assets, net | 318,465 | 318,465 | 338,895 | |
Tradename | ||||
Business Acquisitions | ||||
Intangible assets, net | 172,328 | 172,328 | 179,356 | |
Customer relationships | ||||
Business Acquisitions | ||||
Intangible assets, net | 146,137 | 146,137 | $ 159,539 | |
Birch Benders | ||||
Business Acquisitions | ||||
Fair values increase in accounts receivables | 253 | |||
Fair values decrease in inventory | 167 | |||
Fair values decrease in other current assets | 11 | |||
Fair values decrease in accounts payable | 131 | |||
Fair values increase in accrued expenses and other liabilities | 367 | |||
Fair values increase in goodwill | 161 | |||
Goodwill | 42,100 | $ 42,100 | $ 42,052 | |
Weighted average amortization period | 20 years | |||
Birch Benders | Tradename | ||||
Business Acquisitions | ||||
Intangible assets, net | 90,600 | $ 90,600 | ||
Weighted average amortization period | 20 years | |||
Birch Benders | Customer relationships | ||||
Business Acquisitions | ||||
Intangible assets, net | $ 5,700 | $ 5,700 | ||
Weighted average amortization period | 20 years |
Revenue Recognition (Details)
Revenue Recognition (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 25, 2021 | Sep. 26, 2020 | Sep. 25, 2021 | Sep. 26, 2020 | |
Revenue Recognition | ||||
Total net sales | $ 178,733 | $ 136,928 | $ 529,942 | $ 398,336 |
Rao's | ||||
Revenue Recognition | ||||
Total net sales | 101,118 | 75,157 | 299,632 | 217,382 |
Noosa | ||||
Revenue Recognition | ||||
Total net sales | 41,712 | 38,308 | 124,298 | 115,002 |
Michael Angelo's | ||||
Revenue Recognition | ||||
Total net sales | 22,090 | $ 23,463 | 59,687 | $ 65,952 |
Birch Bender's | ||||
Revenue Recognition | ||||
Total net sales | $ 13,813 | $ 46,325 |
Inventories (Details)
Inventories (Details) - USD ($) $ in Thousands | Sep. 25, 2021 | Dec. 26, 2020 |
Inventories | ||
Finished goods | $ 49,206 | $ 27,734 |
Raw materials and packaging supplies | 11,071 | 19,335 |
Total inventories | $ 60,277 | $ 47,069 |
Goodwill (Details)
Goodwill (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 25, 2021 | Sep. 26, 2020 | Sep. 25, 2021 | Sep. 26, 2020 | |
Goodwill | ||||
Balance as of December 26, 2020 | $ 437,290 | |||
Purchase accounting adjustments (Note 3) | 161 | |||
Balance as of June 26, 2021 | $ 437,451 | 437,451 | ||
Impairment charges | $ 0 | $ 0 | $ 0 | $ 0 |
Intangible Assets, Net (Details
Intangible Assets, Net (Details) - USD ($) $ in Thousands | Sep. 25, 2021 | Dec. 26, 2020 |
Intangible assets - definite lives | ||
Gross carrying amount | $ 405,347 | $ 405,347 |
Accumulated amortization | 86,882 | 66,452 |
Total | 318,465 | 338,895 |
Intangible assets - indefinite lives | ||
Gross Carrying Amount | 558,347 | 558,347 |
Net carrying amount | 471,465 | 491,895 |
Tradename | ||
Intangible assets - indefinite lives | ||
Net carrying amount | 153,000 | 153,000 |
Customer relationships | ||
Intangible assets - definite lives | ||
Gross carrying amount | 213,000 | 213,000 |
Accumulated amortization | 66,863 | 53,461 |
Total | 146,137 | 159,539 |
Tradename | ||
Intangible assets - definite lives | ||
Gross carrying amount | 192,347 | 192,347 |
Accumulated amortization | 20,019 | 12,991 |
Total | $ 172,328 | $ 179,356 |
Intangible Assets, Net - Narrat
Intangible Assets, Net - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 25, 2021 | Sep. 26, 2020 | Sep. 25, 2021 | Sep. 26, 2020 | |
Intangible Assets, Net | ||||
Amortization expense | $ 6,800 | $ 5,600 | $ 20,400 | $ 16,800 |
Impairment charges | $ 0 | $ 0 | $ 0 | $ 0 |
Intangible Assets, Net - Amorti
Intangible Assets, Net - Amortization expense (Details) - USD ($) $ in Thousands | Sep. 25, 2021 | Dec. 26, 2020 |
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract] | ||
Remainder of 2021 | $ 6,810 | |
2022 | 27,240 | |
2023 | 27,240 | |
2024 | 27,240 | |
2025 | 27,240 | |
2026 and thereafter | 202,695 | |
Total | $ 318,465 | $ 338,895 |
Accrued Expenses (Details)
Accrued Expenses (Details) - USD ($) $ in Thousands | Sep. 25, 2021 | Dec. 26, 2020 |
Accrued Expenses | ||
Accrued trade | $ 19,686 | $ 23,010 |
Accrued general expense | 23,353 | 18,275 |
Accrued compensation and benefits | 12,696 | 20,179 |
Accrued marketing | 4,679 | 3,637 |
Total accrued expenses | $ 60,414 | $ 65,101 |
Long-term debt - Schedule of Lo
Long-term debt - Schedule of Long-term debt (Details) - USD ($) $ in Thousands | Sep. 25, 2021 | Dec. 26, 2020 |
Long-term debt | ||
Principal | $ 787,113 | $ 374,146 |
Unamortized debt issuance costs | (12,293) | (10,282) |
Total debt, net | 363,864 | |
Finance lease liabilities | 7,113 | |
Total debt | 774,820 | |
Less: current portion of long-term debt | 5,800 | 3,818 |
Less: current portion of finance lease liabilities | 97 | |
Total long-term debt | 768,923 | 360,046 |
Initial First Lien Term Loan Facility | ||
Long-term debt | ||
Principal | 580,000 | |
Unamortized debt issuance costs | (7,985) | |
Total debt, net | 572,015 | |
Initial Second Lien Facility | ||
Long-term debt | ||
Principal | 200,000 | |
Unamortized debt issuance costs | (4,308) | |
Total debt, net | $ 195,692 | |
Senior debt | ||
Long-term debt | ||
Principal | 374,146 | |
Unamortized debt issuance costs | (10,282) | |
Total debt, net | $ 363,864 |
Long-term debt (Details)
Long-term debt (Details) | Jun. 08, 2021USD ($) | Jun. 30, 2021USD ($) | Nov. 30, 2018USD ($) | Sep. 25, 2021USD ($) | Sep. 26, 2020USD ($) | Sep. 25, 2021USD ($) | Sep. 26, 2020USD ($) | Dec. 26, 2020USD ($) | Oct. 31, 2020USD ($) |
Long-term debt | |||||||||
Dividends | $ 400,000,000 | ||||||||
Payment of debt issuance costs | $ 3,046,000 | ||||||||
Amortization of debt issuance costs | 1,566,000 | $ 1,253,000 | |||||||
Interest expense. | |||||||||
Long-term debt | |||||||||
Amortization of debt Discount | $ 500,000 | $ 400,000 | 1,600,000 | $ 1,300,000 | |||||
Revolving Facility | |||||||||
Long-term debt | |||||||||
Write off of debt issuance costs | $ 300,000 | ||||||||
Payment of debt issuance costs | 1,100,000 | ||||||||
Amortization of debt issuance costs | $ 200,000 | ||||||||
Available credit | 125,000,000 | 125,000,000 | |||||||
Outstanding debt | 0 | 0 | |||||||
Revolving Facility | Deutsche Bank, and Aresbank, S.A | |||||||||
Long-term debt | |||||||||
Loan amount | $ 45,000,000 | ||||||||
Repayments of Lines of Credit | 7,000,000 | ||||||||
First Lien Revolving Line of Credit | |||||||||
Long-term debt | |||||||||
Threshold limit of Percentage of minimum interest rate | 0.00% | ||||||||
Available credit | $ 45,000,000 | ||||||||
Outstanding debt | $ 0 | $ 0 | $ 0 | ||||||
2018 Term loan | Credit Suisse, Citizens Bank N.A | |||||||||
Long-term debt | |||||||||
Loan amount | 280,000,000 | ||||||||
2017 Term loan | |||||||||
Long-term debt | |||||||||
Repayment of outstanding loan | $ 158,400,000 | ||||||||
Incremental Term Loan | |||||||||
Long-term debt | |||||||||
Loan amount | $ 100,000,000 | ||||||||
Debt issuance costs | $ 3,200,000 | ||||||||
2018 Term loan and Incremental Term loan | |||||||||
Long-term debt | |||||||||
Write off of debt issuance costs | $ 9,400,000 | ||||||||
Effective interest rate (as a percent) | 5.70% | ||||||||
Required cash payment amount related to financial covenant testing for excess cash flow | $ 0 | ||||||||
2018 Term loan and Incremental Term loan | Credit Suisse, Citizens Bank N.A | |||||||||
Long-term debt | |||||||||
Repayment of outstanding loan | 373,200,000 | ||||||||
First Lien Credit Agreement | |||||||||
Long-term debt | |||||||||
Threshold limit, maximum leverage ratio of consolidated first lien net debt to consolidated EBITDA | 6.95 | ||||||||
Financial covenant testing threshold percentage of aggregate revolving credit commitments | 35.00% | ||||||||
First Lien Credit Agreement | Initial First Lien Term Loan Facility | |||||||||
Long-term debt | |||||||||
Loan amount | 580,000,000 | ||||||||
First Lien Credit Agreement | Revolving Facility | |||||||||
Long-term debt | |||||||||
Initial term loan facility | 125,000,000 | ||||||||
First Lien Credit Agreement | Letter of credit facility | |||||||||
Long-term debt | |||||||||
Initial term loan facility | 45,000,000 | ||||||||
Second Lien Credit Agreement | Initial Second Lien Facility | |||||||||
Long-term debt | |||||||||
Loan amount | $ 200,000,000 | ||||||||
Initial First Lien Term Loan Facility and Revolving Facility | |||||||||
Long-term debt | |||||||||
Percentage of reduction in interest upon consummation of an IPO | 0.50 | ||||||||
Effective interest rate (as a percent) | 5.00% | 5.00% | |||||||
Initial First Lien Term Loan Facility and Revolving Facility | LIBOR | Minimum | |||||||||
Long-term debt | |||||||||
Interest rate (as a percent) | 4.00% | ||||||||
Initial First Lien Term Loan Facility and Revolving Facility | LIBOR | Maximum | |||||||||
Long-term debt | |||||||||
Interest rate (as a percent) | 4.25% | ||||||||
Initial First Lien Term Loan Facility | |||||||||
Long-term debt | |||||||||
Debt discounts on issuance | $ 1,500,000 | ||||||||
Payment of debt issuance costs | $ 6,800,000 | ||||||||
Threshold limit of Percentage of minimum interest rate | 0.75% | ||||||||
Initial Second Lien Facility | |||||||||
Long-term debt | |||||||||
Debt discounts on issuance | $ 4,000,000 | ||||||||
Payment of debt issuance costs | $ 500,000 | ||||||||
Percentage of reduction in interest upon consummation of an IPO | 0.25 | ||||||||
Threshold limit of Percentage of minimum interest rate | 0.75% | ||||||||
Effective interest rate (as a percent) | 8.75% | 8.75% | |||||||
Initial Second Lien Facility | LIBOR | |||||||||
Long-term debt | |||||||||
Interest rate (as a percent) | 8.00% |
Leases - Components of lease ex
Leases - Components of lease expenses (Details) $ in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 25, 2021USD ($) | Sep. 25, 2021USD ($) | |
Operating lease cost: | ||
Total operating lease cost | $ 1,197 | $ 3,438 |
Total finance lease cost | 199 | 595 |
Total lease cost | 1,457 | 4,205 |
Cost of sales and Selling, general and administrative | ||
Operating lease cost: | ||
Lease cost | 841 | 2,426 |
Variable lease cost | 356 | 1,012 |
Short term lease cost | 61 | 172 |
Amortization of right-of-use assets | 66 | 196 |
Interest expense. | ||
Operating lease cost: | ||
Interest on lease liabilities | $ 133 | $ 399 |
Real estate | Minimum | ||
Leases | ||
Lease term | 2 years | 2 years |
Real estate | Maximum | ||
Leases | ||
Lease term | 10 years | 10 years |
Equipment | ||
Leases | ||
Lease term | 5 years | 5 years |
Manufacturing facilities and office space | ||
Leases | ||
Lessor, Operating Lease, Existence of Option to Extend [true false] | true | |
Manufacturing facilities and office space | Minimum | ||
Leases | ||
Lease term | 2 years | 2 years |
Manufacturing facilities and office space | Maximum | ||
Leases | ||
Lease term | 30 years | 30 years |
Leases - Assets and Liabilities
Leases - Assets and Liabilities (Details) $ in Thousands | Sep. 25, 2021USD ($) |
Leases | |
Operating lease right-of-use assets | $ 16,267 |
Finance lease right-of-use assets | $ 6,364 |
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration] | Property, Plant and Equipment, Net |
Total lease assets | $ 22,631 |
Operating lease liabilities | 3,176 |
Finance lease liabilities | $ 97 |
Finance Lease, Liability, Current, Statement of Financial Position [Extensible Enumeration] | Long-term Debt and Lease Obligation, Current |
Operating lease liability, long-term | $ 18,089 |
Finance lease liabilities, long-term | $ 7,016 |
Finance Lease, Liability, Noncurrent, Statement of Financial Position [Extensible Enumeration] | Long-term Debt and Lease Obligation |
Total lease liabilities | $ 28,378 |
Leases - Other information (Det
Leases - Other information (Details) | Sep. 25, 2021 |
Leases | |
Weighted-average remaining lease term (years) - operating leases | 7 years 3 months 18 days |
Weighted-average discount rate - operating leases | 4.90% |
Weighted-average remaining lease term (years) - Finance leases | 34 years 10 months 24 days |
Weighted-average discount rate - Finance leases | 7.80% |
Leases - Future maturities of l
Leases - Future maturities of lease liabilities (Details) $ in Thousands | Sep. 25, 2021USD ($) |
Operating Leases | |
Remainder of 2021 | $ 1,066 |
2022 | 4,035 |
2023 | 4,040 |
2024 | 3,472 |
2025 | 2,961 |
Thereafter | 9,914 |
Total lease payments | 25,488 |
Less: Interest | (4,223) |
Present value of lease liabilities | 21,265 |
Finance Leases | |
Remainder of 2021 | 155 |
2022 | 604 |
2023 | 609 |
2024 | 557 |
2025 | 549 |
Thereafter | 19,489 |
Total lease payments | 21,963 |
Less: Interest | (14,850) |
Present value of lease liabilities | $ 7,113 |
Leases - Supplemental cash flow
Leases - Supplemental cash flow and other information (Details) | 9 Months Ended |
Sep. 25, 2021USD ($) | |
Leases | |
Operating cash flows from operating leases | $ 2,883,000 |
Operating cash flows from finance leases | 399,000 |
Financing cash flows from finance leases | 49,000 |
Right-of-use assets obtained in exchange for new operating lease liabilities | $ 1,638,000 |
Leases - Future minimum payment
Leases - Future minimum payments under lease arrangements - As per 840 (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |
Sep. 26, 2020 | Sep. 26, 2020 | Dec. 26, 2020 | |
Capital Leases, Future Minimum Payments, Net Minimum Payments, Fiscal Year Maturity [Abstract] | |||
2021 | $ 105 | ||
2022 | 105 | ||
2023 | 105 | ||
2024 | 48 | ||
2025 | 34 | ||
Total | 397 | ||
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract] | |||
2021 | 3,783 | ||
2022 | 3,808 | ||
2023 | 3,813 | ||
2024 | 3,244 | ||
2025 | 2,733 | ||
Thereafter | 7,650 | ||
Total | 25,031 | ||
Rent expense for operating lease | $ 800 | $ 2,500 | |
Morning Fresh | |||
Capital Leases, Future Minimum Payments, Net Minimum Payments, Fiscal Year Maturity [Abstract] | |||
2021 | 495 | ||
2022 | 500 | ||
2023 | 505 | ||
2024 | 510 | ||
2025 | 515 | ||
Thereafter | 19,489 | ||
Total | 22,014 | ||
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract] | |||
2021 | 27 | ||
2022 | 27 | ||
2023 | 28 | ||
2024 | 28 | ||
2025 | 28 | ||
Thereafter | 1,065 | ||
Total | $ 1,203 |
Commitments and Contingencies (
Commitments and Contingencies (Details) $ in Millions | Sep. 25, 2021USD ($) |
Commitments and Contingencies. | |
Purchase commitments to third-party manufacturers | $ 22.1 |
Equity-Based Compensation (Deta
Equity-Based Compensation (Details) $ in Millions | Sep. 21, 2021USD ($)trancheinstallmentitemshares | Sep. 08, 2021shares | Sep. 25, 2021USD ($)shares | Sep. 26, 2020USD ($) | Sep. 25, 2021USD ($)shares | Sep. 26, 2020USD ($) |
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||||
Stock split ratio | 120.8 | |||||
Number of fractional shares issued | 0 | |||||
2021 Equity Incentive Plan | ||||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||||
Shares reserved for future issuance | 9,739,244 | 8,084,396 | 8,084,396 | |||
Time Based Restricted Common Stock | ||||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||||
Unvested shares | 94,646 | 94,646 | ||||
Multiplying factor for invested capital | tranche | 2 | |||||
Volume of weighted average share price, number of day | item | 30 | |||||
Maximum percentage owned by ultimate parent | 25.00% | |||||
Term of post IPO | 30 months | |||||
Equity-based compensation expense | $ | $ 0.3 | $ 0.5 | $ 1.4 | $ 1.5 | ||
Performance Based Incentive Units | ||||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||||
Unvested shares | 3,319,291 | 3,319,291 | ||||
Performance Based Restricted Stock Units | ||||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||||
Modified grant date fair value | $ | $ 13 | |||||
Equity-based compensation expense | $ | $ 16.5 | $ 0.7 | ||||
Expiration period | 30 months | |||||
Performance Based Restricted Stock Units | 2021 Equity Incentive Plan | Tranche Two | Employees | ||||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||||
Grants in period | 687,690 | |||||
Restricted Stock Units | 2021 Equity Incentive Plan | Employees and Independent Directors | ||||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||||
Grants in period | 967,158 | |||||
Restricted Stock Units | 2021 Equity Incentive Plan | Tranche One | Employees | ||||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||||
Grants in period | 759,362 | |||||
Vesting percentage | 100.00% | |||||
Restricted Stock Units | 2021 Equity Incentive Plan | Tranche Three | Employees and Independent Directors | ||||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||||
Grants in period | 191,130 | |||||
Number of installments | installment | 3 | |||||
Restricted Stock Units | 2021 Equity Incentive Plan | Tranche Four | Director | ||||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||||
Grants in period | 16,666 |
Stockholders' Equity (Details)
Stockholders' Equity (Details) $ / shares in Units, $ in Thousands | Sep. 08, 2021$ / sharesshares | Jun. 08, 2021USD ($) | Sep. 25, 2021USD ($)$ / sharesshares | Sep. 23, 2021$ / sharesshares | Sep. 07, 2021$ / sharesshares | Dec. 26, 2020$ / sharesshares |
Stockholders' Equity | ||||||
Payment of dividends | $ | $ 400,000 | $ 400,000 | ||||
Shares authorized | 510,000,000 | |||||
Common stock, authorized (in shares) | 500,000,000 | 500,000,000 | 500,000,000 | 750,000 | 500,000,000 | |
Common stock, par value (in dollars per share) | $ / shares | $ 0.001 | $ 0.001 | $ 0.001 | $ 0.01 | $ 0.001 | |
Preferred stock, authorized (in shares) | 10,000,000 | 10,000,000 | 10,000,000 | |||
Preferred stock, par value (in dollars per share) | $ / shares | $ 0.001 | $ 0.001 | $ 0.001 | |||
Stock split ratio | 120.8 | |||||
Number of fractional shares issued | 0 | |||||
Common stock, issued (in shares) | 74,058,447 | 74,058,447 | 74,058,447 | |||
Common stock, outstanding (in shares) | 74,058,447 | 74,058,447 | 74,058,447 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 25, 2021 | Sep. 26, 2020 | Sep. 25, 2021 | Sep. 26, 2020 | |
Income Taxes | ||||
Income (loss) before income taxes | $ (1,117) | $ 2,010 | $ 13,972 | $ 16,002 |
Effective income tax (expense) benefit | $ (3,497) | $ 226 | $ (8,213) | $ (4,698) |
Effective tax rate | 313.10% | 11.20% | 58.80% | 29.40% |
Debt extinguishment costs | $ 9,700 |
Fair Value of Financial Instr_2
Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 25, 2021 | Dec. 26, 2020 | |
Fair Value of Financial Instruments | ||
Assets transfer from level 1 to level 2 | $ 0 | $ 0 |
Assets transfer from level 2 to level 1 | 0 | 0 |
Liabilities transfer from level 1 to level 2 | 0 | 0 |
Liabilities transfer from level 2 to level 1 | 0 | 0 |
Assets transfer in or out of level 3 | 0 | 0 |
Liability transfer in or out of level 3 | $ 0 | $ 0 |
Related Party Transactions (Det
Related Party Transactions (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 25, 2021USD ($)item | Sep. 26, 2020USD ($) | Sep. 25, 2021USD ($)item | Sep. 26, 2020USD ($) | |
Related Party Transaction [Line Items] | ||||
Related party leases | item | 2 | 2 | ||
Finance lease liability | $ 7,016 | $ 7,016 | ||
Finance Lease, Liability, Noncurrent, Statement of Financial Position [Extensible Enumeration] | Long-term Debt and Lease Obligation | Long-term Debt and Lease Obligation | ||
Operating lease liability, long-term | $ 18,089 | $ 18,089 | ||
Morning Fresh | ||||
Related Party Transaction [Line Items] | ||||
Finance lease liability | 6,800 | 6,800 | ||
Operating lease liability, long-term | 500 | 500 | ||
Total facility lease payments | $ 144 | $ 393 | ||
Total land lease payments | $ 120 | $ 361 |
Related Party Transactions - Tr
Related Party Transactions - Transactions (Details) - Morning Fresh - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 25, 2021 | Sep. 26, 2020 | Sep. 25, 2021 | Sep. 26, 2020 | Dec. 26, 2020 | |
Related Party Transaction [Line Items] | |||||
Sales | $ 122 | $ 112 | $ 357 | $ 329 | |
Purchases | 1,468 | $ 1,186 | 4,309 | $ 3,792 | |
Receivables | 34 | 34 | $ 66 | ||
Payables | $ 666 | $ 666 | $ 503 |
Related Party Transactions - Na
Related Party Transactions - Narrative (Details) | Feb. 26, 2021USD ($) | Jan. 31, 2019USD ($)shares | Sep. 25, 2021USD ($)item | Sep. 26, 2020USD ($) | Sep. 25, 2021USD ($)item | Sep. 26, 2020USD ($) | Dec. 26, 2020USD ($) |
Related Party Transaction [Line Items] | |||||||
Future commitments to purchase | $ 22,100,000 | $ 22,100,000 | |||||
Stockholder's note receivable | $ 6,000,000 | ||||||
Morning Fresh | |||||||
Related Party Transaction [Line Items] | |||||||
Purchases of labels | $ 1,468,000 | $ 1,186,000 | $ 4,309,000 | $ 3,792,000 | |||
Morning Fresh | Milk supply agreement | |||||||
Related Party Transaction [Line Items] | |||||||
Number of additional periods | item | 15 | 15 | |||||
Term of extension period | 2 years | ||||||
Written notice required to terminate agreement | 4 years | ||||||
Maximum quantity agreed to be received | 3,650,000 | 3,650,000 | |||||
Future commitments to purchase | $ 33,900,000 | $ 33,900,000 | |||||
Monthly additional costs | 33,000 | 33,000 | |||||
Early termination penalty | 0 | $ 0 | |||||
Term of Agreement | 10 years | ||||||
Morning Fresh | Milk supply agreement | Maximum | |||||||
Related Party Transaction [Line Items] | |||||||
Early termination penalty | 3,000,000 | $ 3,000,000 | |||||
Stockholder | Class A units | |||||||
Related Party Transaction [Line Items] | |||||||
Stock issued in exchange of notes receivable | shares | 5,217 | ||||||
Stockholder's note receivable | $ 6,000,000 | ||||||
Interest rate (as a percent) | 3.12% | ||||||
Proceeds from stockholder note receivable | $ 6,400,000 | ||||||
Fort Dearborn Company | |||||||
Related Party Transaction [Line Items] | |||||||
Purchases of labels | $ 200,000 | $ 700,000 | $ 1,500,000 | $ 1,300,000 |
Earnings Per Share - Basic and
Earnings Per Share - Basic and diluted earnings (loss) per share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 25, 2021 | Sep. 26, 2020 | Sep. 25, 2021 | Sep. 26, 2020 | |
Earnings Per Share | ||||
Net income (loss) | $ (4,614) | $ 2,236 | $ 5,759 | $ 11,304 |
Basic | ||||
Weighted average basic common shares outstanding | 74,058,447 | 74,058,719 | 74,058,447 | 74,058,644 |
Basic earnings (loss) per share | $ (0.06) | $ 0.03 | $ 0.08 | $ 0.15 |
Diluted | ||||
Weighted average diluted common shares outstanding | 74,058,447 | 76,394,135 | 74,058,453 | 76,259,190 |
Diluted earnings (loss) per share | $ (0.06) | $ 0.03 | $ 0.08 | $ 0.15 |
Earnings Per Share (Details)
Earnings Per Share (Details) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 25, 2021 | Sep. 26, 2020 | Sep. 25, 2021 | Sep. 26, 2020 | |
Restricted stock | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Anti-dilutive shares underlying stock options | 61,000 | 0 | 0 | 0 |
Subsequent Events (Details)
Subsequent Events (Details) $ / shares in Units, $ in Thousands | Nov. 09, 2021shares | Oct. 08, 2021USD ($) | Oct. 05, 2021USD ($)shares | Sep. 29, 2021USD ($) | Sep. 27, 2021USD ($)$ / sharesshares | Sep. 22, 2021$ / sharesshares | Sep. 25, 2021USD ($)$ / sharesshares | Dec. 23, 2023USD ($) | Dec. 24, 2022USD ($) | Nov. 04, 2021tranche | Sep. 26, 2021 | Sep. 23, 2021$ / shares | Sep. 08, 2021$ / sharesshares | Sep. 07, 2021$ / shares | Dec. 26, 2020USD ($)$ / sharesshares |
Subsequent Event [Line Items] | |||||||||||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.001 | $ 0.001 | $ 0.001 | $ 0.01 | $ 0.001 | ||||||||||
Common stock, outstanding (in shares) | shares | 74,058,447 | 74,058,447 | 74,058,447 | ||||||||||||
Loss on the extinguishment | $ (9,717) | ||||||||||||||
Principal | 787,113 | $ 374,146 | |||||||||||||
Initial Second Lien Facility | |||||||||||||||
Subsequent Event [Line Items] | |||||||||||||||
Principal | 200,000 | ||||||||||||||
Initial First Lien Term Loan Facility | |||||||||||||||
Subsequent Event [Line Items] | |||||||||||||||
Principal | $ 580,000 | ||||||||||||||
IPO | |||||||||||||||
Subsequent Event [Line Items] | |||||||||||||||
Common stock issued (in shares) | shares | 23,334,000 | ||||||||||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.001 | ||||||||||||||
Offering price (in dollar per share) | $ / shares | $ 12 | ||||||||||||||
Over-Allotment Option | |||||||||||||||
Subsequent Event [Line Items] | |||||||||||||||
Common stock issued (in shares) | shares | 3,500,100 | ||||||||||||||
Subsequent Event | |||||||||||||||
Subsequent Event [Line Items] | |||||||||||||||
Common stock issued (in shares) | shares | 26,834,100 | ||||||||||||||
Percentage ownership of new investors from the IPO | 26.60% | ||||||||||||||
Common stock, outstanding (in shares) | shares | 100,892,547 | ||||||||||||||
Multiplying factor for invested capital | tranche | 4 | ||||||||||||||
Equity-based compensation expense | $ 1,100 | $ 5,000 | |||||||||||||
Subsequent Event | Initial Second Lien Facility | |||||||||||||||
Subsequent Event [Line Items] | |||||||||||||||
Accrued interest | $ 2,900 | ||||||||||||||
Write off of debt issuance costs | 4,300 | ||||||||||||||
Prepayment of debt | 200,000 | ||||||||||||||
Subsequent Event | Initial First Lien Term Loan Facility | |||||||||||||||
Subsequent Event [Line Items] | |||||||||||||||
Accrued interest | $ 900 | $ 900 | |||||||||||||
Loss on the extinguishment | $ 1,400 | ||||||||||||||
Prepayment of debt | 39,500 | $ 59,700 | |||||||||||||
Principal | $ 480,800 | ||||||||||||||
Subsequent Event | Initial First Lien Term Loan Facility and Revolving Facility | |||||||||||||||
Subsequent Event [Line Items] | |||||||||||||||
Decrease in interest rate (as a percent) | (50.00%) | ||||||||||||||
Effective interest rate (as a percent) | 4.50% | 5.00% | |||||||||||||
Subsequent Event | IPO | |||||||||||||||
Subsequent Event [Line Items] | |||||||||||||||
Common stock issued (in shares) | shares | 23,334,000 | ||||||||||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.001 | ||||||||||||||
Offering price (in dollar per share) | $ / shares | $ 12 | ||||||||||||||
Net proceeds | $ 263,200 | ||||||||||||||
Underwriting discounts and commissions | $ 16,800 | ||||||||||||||
Subsequent Event | Over-Allotment Option | |||||||||||||||
Subsequent Event [Line Items] | |||||||||||||||
Common stock issued (in shares) | shares | 3,500,100 | 3,500,100 | |||||||||||||
Net proceeds | $ 39,500 | ||||||||||||||
Underwriting discounts and commissions | $ 2,500 |