Document and Entity Information
Document and Entity Information - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2022 | Mar. 03, 2023 | Jun. 25, 2022 | |
Document and Entity Information [Abstract] | |||
Document Type | 10-K | ||
Document Annual Report | true | ||
Document Transition Report | false | ||
Document Period End Date | Dec. 31, 2022 | ||
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 | Suite 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 Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Accelerated Filer | ||
Entity Small Business | false | ||
Entity Emerging Growth Company | true | ||
Entity Ex Transition Period | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 441.5 | ||
Entity Common Stock, Shares Outstanding | 100,214,297 | ||
Auditor Name | Deloitte & Touche LLP | ||
Auditor Firm ID | 34 | ||
Auditor Location | Denver, Colorado | ||
Entity Central Index Key | 0001856608 | ||
Current Fiscal Year End Date | --12-31 | ||
Document Fiscal Year Focus | 2022 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false | ||
ICFR Auditor Attestation Flag | false |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 25, 2021 |
CURRENT ASSETS: | ||
Cash and cash equivalents | $ 138,654 | $ 66,154 |
Accounts receivable, net | 87,695 | 70,729 |
Inventories, net | 92,602 | 51,615 |
Prepaid expenses and other current assets | 11,974 | 6,685 |
Total current assets | 330,925 | 195,183 |
Property and equipment, net | 64,317 | 62,671 |
Operating lease right-of-use assets | 13,332 | 15,672 |
Goodwill | 395,399 | 437,451 |
Intangible assets, net | 351,547 | 464,655 |
Other long-term assets | 3,279 | 2,299 |
TOTAL ASSETS | 1,158,799 | 1,177,931 |
CURRENT LIABILITIES: | ||
Accounts payable | 49,264 | 37,254 |
Accrued expenses | 69,571 | 51,757 |
Current portion of long-term finance lease liabilities | 99 | 98 |
Current portion of long-term lease liabilities | 3,308 | 3,216 |
Total current liabilities | 122,242 | 92,325 |
Long-term debt, net of debt issuance costs | 482,344 | 481,420 |
Deferred income taxes | 63,644 | 76,976 |
Long-term operating lease liabilities | 14,063 | 17,302 |
Other long-term liabilities | 483 | 421 |
TOTAL LIABILITIES | 682,776 | 668,444 |
COMMITMENTS AND CONTINGENCIES (Note 12) | ||
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, 100,967,910 and 100,892,547 shares issued and outstanding as of December 31, 2022 and December 25, 2021, respectively | 101 | 101 |
Additional paid-in-capital | 577,664 | 559,226 |
Accumulated deficit | (103,291) | (49,840) |
Accumulated other comprehensive income | 1,549 | |
TOTAL STOCKHOLDERS' EQUITY | 476,023 | 509,487 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 1,158,799 | $ 1,177,931 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2022 | Dec. 25, 2021 |
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) | 100,967,910 | 100,892,547 |
Common stock, outstanding (in shares) | 100,967,910 | 100,892,547 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 25, 2021 | Dec. 26, 2020 | |
Consolidated Statements of Operations | |||
Net sales | $ 878,371 | $ 719,186 | $ 560,067 |
Revenue, Product and Service [Extensible Enumeration] | us-gaap:ProductMember | us-gaap:ProductMember | us-gaap:ProductMember |
Cost of sales | $ 631,706 | $ 498,394 | $ 373,314 |
Cost, Product and Service [Extensible Enumeration] | us-gaap:ProductMember | us-gaap:ProductMember | us-gaap:ProductMember |
Gross profit | $ 246,665 | $ 220,792 | $ 186,753 |
Operating expenses: | |||
Selling, general and administrative | 163,025 | 135,060 | 124,612 |
Depreciation and amortization | 28,785 | 28,871 | 24,744 |
Loss on asset sale | 51,291 | ||
Impairment of goodwill | 42,052 | 0 | 0 |
Loss on extinguishment of debt | 15,382 | ||
Forgiveness of capital advance | 5,000 | ||
Total operating expenses | 285,153 | 184,313 | 149,356 |
Operating income (loss) | (38,488) | 36,479 | 37,397 |
Interest expense, net | 27,851 | 30,885 | 19,895 |
Income (loss) before income taxes | (66,339) | 5,594 | 17,502 |
Income tax (expense) benefit | (12,888) | 3,675 | 6,677 |
Net income (loss) | $ (53,451) | $ 1,919 | $ 10,825 |
Earnings (loss) per share: | |||
Basic (in dollars per shares) | $ (0.53) | $ 0.02 | $ 0.15 |
Diluted (in dollars per shares) | $ (0.53) | $ 0.02 | $ 0.14 |
Weighted average shares outstanding: | |||
Basic (in shares) | 100,917,978 | 80,616,326 | 74,058,569 |
Diluted (in shares) | 100,917,978 | 80,616,326 | 75,921,065 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 25, 2021 | Dec. 26, 2020 | |
Consolidated Statements of Comprehensive Income (Loss) | |||
Net income (loss) | $ (53,451) | $ 1,919 | $ 10,825 |
Other comprehensive income: | |||
Change in net unrealized gain on derivative instruments | 2,038 | ||
Income tax effect | (489) | ||
Unrealized gain on derivative instruments, net of tax | 1,549 | ||
Total comprehensive income (loss) | $ (51,902) | $ 1,919 | $ 10,825 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands | Common Stock | Stockholder's Note Receivable | Additional Paid-in Capital | Retained Earnings (Accumulated Deficit) | Accumulated Other Comprehensive Income | Total |
Balances, at beginning of period at Dec. 28, 2019 | $ 74 | $ (6,000) | $ 652,507 | $ (62,584) | $ 583,997 | |
Balances, at beginning (in shares) at Dec. 28, 2019 | 74,058,747 | |||||
Increase (Decrease) in Stockholders' Equity | ||||||
Equity-based compensation expense | 1,914 | 1,914 | ||||
Cash contributions to Limited Partnership | (35) | (35) | ||||
Cash contributions to Limited Partnership (in shares) | (300) | |||||
Net income (loss) | 10,825 | 10,825 | ||||
Balances, at ending of period at Dec. 26, 2020 | $ 74 | (6,000) | 654,386 | (51,759) | 596,701 | |
Balances, at ending (in shares) at Dec. 26, 2020 | 74,058,447 | |||||
Increase (Decrease) in Stockholders' Equity | ||||||
Proceeds from stockholder's note receivable | $ 6,000 | 6,000 | ||||
Dividend distribution ($5.40 per share) | (400,000) | (400,000) | ||||
Proceeds from issuance of public stock | $ 27 | 321,982 | 322,009 | |||
Proceeds from issuance of public stock (in shares) | 26,834,100 | |||||
Underwriter discount on issuance of public stock | (19,320) | (19,320) | ||||
Capitalized IPO costs netted with IPO proceeds | (7,645) | (7,645) | ||||
Equity-based compensation expense | 9,823 | 9,823 | ||||
Net income (loss) | 1,919 | 1,919 | ||||
Balances, at ending of period at Dec. 25, 2021 | $ 101 | 559,226 | (49,840) | 509,487 | ||
Balances, at ending (in shares) at Dec. 25, 2021 | 100,892,547 | |||||
Increase (Decrease) in Stockholders' Equity | ||||||
Equity-based compensation expense | 18,438 | 18,438 | ||||
Shares issued upon vesting of restricted stock units (in shares) | 75,363 | |||||
Other comprehensive income | $ 1,549 | 1,549 | ||||
Net income (loss) | (53,451) | (53,451) | ||||
Balances, at ending of period at Dec. 31, 2022 | $ 101 | $ 577,664 | $ (103,291) | $ 1,549 | $ 476,023 | |
Balances, at ending (in shares) at Dec. 31, 2022 | 100,967,910 |
Consolidated Statements of Ch_2
Consolidated Statements of Changes in Stockholders' Equity (Parenthetical) | 12 Months Ended |
Dec. 25, 2021 $ / shares | |
Consolidated Statements of Changes in Stockholders' Equity | |
Dividend distributions (in dollar per share) | $ 5.40 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | 24 Months Ended | ||
Dec. 31, 2022 | Dec. 25, 2021 | Dec. 26, 2020 | Dec. 25, 2021 | |
Operating activities | ||||
Net income (loss) | $ (53,451) | $ 1,919 | $ 10,825 | |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||
Depreciation and amortization | 38,868 | 37,812 | 33,797 | |
Equity-based compensation expense | 18,438 | 9,823 | 1,914 | |
Loss on foreign currency contracts | 33 | |||
Non-cash interest expense | 59 | |||
Deferred income taxes | (13,821) | 2,243 | 4,749 | |
Amortization of debt issuance costs | 1,331 | 1,883 | 1,775 | |
Non-cash operating lease expense | 2,418 | 2,278 | ||
Provision for excess and obsolete inventory | 2,482 | 822 | 442 | |
Loss on disposal of property and equipment | 307 | 757 | ||
Impairment of goodwill | 42,052 | 0 | 0 | $ 0 |
Loss on extinguishment of debt | 15,382 | |||
Loss on asset sale | 51,291 | |||
Forgiveness of capital advance | 5,000 | |||
Other | (125) | (241) | ||
Changes in operating assets and liabilities: | ||||
Accounts receivable, net | (17,032) | (9,387) | (11,297) | |
Inventories, net | (48,891) | (5,449) | (6,912) | |
Prepaid expenses and other current assets | 603 | (9,567) | (796) | |
Other long-term assets | 388 | (35) | (106) | |
Accounts payable | 11,552 | 6,242 | 5,478 | |
Accrued expenses | 12,238 | (8,395) | 20,647 | |
Other long-term liabilities | 62 | (979) | 1,882 | |
Operating lease liabilities | (3,225) | (2,831) | ||
Net cash provided by operating activities | 45,395 | 46,943 | 62,914 | |
Investing activities | ||||
Acquisition of businesses, net of cash acquired | (146,406) | |||
Proceeds from sale of business | 40,000 | |||
Purchases of property and equipment | (12,817) | (14,182) | (3,733) | |
Net cash provided by (used in) investing activities | 27,183 | (14,182) | (150,139) | |
Financing activities | ||||
Contributions to Limited Partnership | (35) | |||
Payments of debt issuance costs | (3,046) | (2,263) | ||
Proceeds from long-term debt | 769,136 | 99,015 | ||
Repayments of long-term debt | (673,346) | (3,054) | ||
Repayments of capital lease obligations | (78) | (66) | (93) | |
Proceeds from revolving facility | 42,500 | |||
Repayments of revolving facility | (42,500) | |||
Net proceeds from issuance of common stock | 302,689 | |||
Proceeds from stockholder's note receivable | 6,000 | |||
Contingent earn out consideration paid | (5,000) | |||
Dividends paid | (400,000) | |||
Net cash (used in) provided by financing activities | (78) | (3,633) | 93,570 | |
Cash and cash equivalents | ||||
Net increase in cash and cash equivalents | 72,500 | 29,128 | 6,345 | |
Cash and cash equivalents at beginning of period | 66,154 | 37,026 | 30,681 | 30,681 |
Cash and cash equivalents at end of period | 138,654 | 66,154 | 37,026 | $ 66,154 |
Supplemental disclosures of cash flow information | ||||
Cash paid for interest | 24,706 | 28,535 | 15,493 | |
Cash paid for taxes | 5,778 | 2,522 | 1,203 | |
Proceeds from income tax refunds | (15) | (44) | (1,798) | |
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 | |||
Lease liabilities arising from operating lease right-of-use assets recognized after ASU No. 2016-02 transition | 78 | 1,638 | ||
Capitalized IPO costs netted with IPO proceeds | 7,645 | |||
Acquisition of property and equipment not yet paid | $ 498 | $ 39 | 153 | |
Contingent earn out consideration related to Birch Benders acquisition | 5,000 | |||
Acquisition of property and equipment through tenant improvement allowance | 822 | |||
Acquisition of property and equipment through capital leases | $ 224 |
Company Overview
Company Overview | 12 Months Ended |
Dec. 31, 2022 | |
Company Overview | |
Company Overview | Note Description of Business Sovos Brands, Inc. and its wholly-owned subsidiaries (the “Company,” “Sovos Brands,” “we,” “us,” “our”) is a growth-oriented consumer-packaged food company with a portfolio of brands aimed at bringing today’s consumers great tasting food that fits the way they live. The Company’s four wholly-owned operating subsidiaries include: Rao’s Specialty Foods, Inc. (“Rao’s”); Bottom Line Food Processors, Inc. doing business as Michael Angelo’s Gourmet Foods, Inc. (“Michael Angelo’s”); Noosa Yoghurt, LLC (“Noosa”); and Birch Benders, LLC (“Birch Benders”). The Company’s principal products include a variety of pasta sauces, dry pasta, soups, frozen entrées Rao’s Michael Angelo’s noosa Birch Benders Through the end of fiscal 2022, the Company sold products marketed under the brand name of Birch Benders. Loss on Asset Sale Birch Benders Basis of Presentation The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated. The consolidated financial statements are presented in U.S. dollars. The Company maintains its accounting records on a 52/53-week fiscal year, ending on the last Saturday in December of each year. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2022 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | Note Reclassification Equity-Based Compensation Use of Estimates as it relates to variable consideration, acquisition accounting fair value allocations, the recoverability of goodwill, other intangible assets, property and equipment, deferred tax assets, inventory valuation, equity-based compensation, and the determination of the useful life of customer relationship and finite-lived trademark intangible assets. Management bases its estimates on historical experience, current conditions and various other assumptions that it believes to be reasonable under the circumstances. These estimates form the basis for making judgments about the carrying values of assets and liabilities and are not readily apparent from other sources. Actual results may differ from these estimates. Cash and Cash Equivalents Accounts Receivable, Net and Credit Losses The allowance for doubtful accounts was approximately $0.8 million and $0.7 million as of December 31, 2022 and December 25, 2021, respectively. Charges related to credit loss on accounts receivables were approximately $6.0 thousand, $0.2 million and $0.2 million for the fiscal years ended December 31, 2022, December 25, 2021 and December 26, 2020, respectively. In addition, in December 2021, the Company entered into an agreement with one of its suppliers, in which the remaining $5.0 million of the original $10.0 million 2016 capital advance balance, scheduled to be repaid by December 31, 2023, was forgiven and treated as if it were repaid in full. Upon execution of the December 2021 agreement, the Company recorded a credit loss of $5.0 million within operating expenses in the Consolidated Statements of Operations and the balance previously reported within other long-term assets in the Consolidated Balance Sheets was eliminated. Deferred Offering Costs— Upon the closing of its initial public offering (“IPO”) in September 2021, the Company had incurred $7.6 million of capitalized deferred offering costs consisting of legal, accounting, consulting, listing and filing fees, which were netted against the IPO proceeds. There were no capitalized deferred offering costs as of December 31, 2022 and December 25, 2021. Inventories Property and Equipment Furniture and Fixtures 1-7 years Leasehold Improvements Lesser of useful life or remaining lease term Machinery and Equipment 7-12 years Computer Equipment 3-5 years Software 3 years Capital Leases Based on lease terms Repairs and maintenance costs are expensed as incurred. Major improvements that extend the life or increase the capacity of property owned are capitalized. Major improvements to leased buildings are capitalized as leasehold improvements. Impairment of Long-Lived Assets Goodwill Birch Benders Goodwill Intangible Assets Customer Relationships 10-20 years Tradename 20-25 years Intangible assets with definite useful lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. If impairment indicators are present, the Company performs a recoverability test, and if it is determined the carrying amount of the asset is not recoverable and its carrying amount exceeds its fair value, then an impairment loss is recognized. There were no impairments of definite lived intangible assets in 2022, 2021 or 2020. See Note 8. Intangible Assets, Net The Rao’s Indefinite-lived intangible assets are tested for impairment by either performing a qualitative evaluation or a quantitative test. The qualitative assessment evaluates factors including macro-economic conditions, industry and company-specific factors, and historical company performance in assessing fair value. If it is determined that it is more likely than not that the fair value of the asset is less than the carrying value, a quantitative test is performed. Otherwise, no further testing is required. If it is determined that it is more likely than not that the fair value of the asset is less than the carrying value, impairment is evaluated by comparing the fair value of the asset with its carrying value, and a loss is recognized for the difference if the fair value exceeds the carrying value. When estimating the fair value, the Company uses certain assumptions, such as forecasted growth rates and cost of capital. These assumptions are consistent with our internal projections and operating plans. Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions. For example, future changes in the judgments, assumptions and estimates that are used in our tradename impairment testing could result in significantly different estimates of the fair values. In addition, changes to, or a failure to achieve business plans or deterioration of macroeconomic conditions could result in reduced cash flows or higher discount rates, leading to a lower valuation that would trigger an impairment of the tradename. There were no impairments of indefinite lived intangible assets in 2022, 2021 or 2020. See Note 8. Intangible Assets, Net Leasing Arrangements Leases 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 Company’s 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 Company’s 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 11. Leases Debt Issuance Costs During 2021, the Company wrote off debt issuance costs of approximately $15.4 million in conjunction with the repayment of the outstanding 2018 Term Loan, Incremental Term Loan, and Initial Second Lien Facility, and partial prepayment of the Initial First Lien Term Loan Facility. During 2022 and 2020, there were no debt issuance costs written off. See Note 10. Long-Term Debt Comprehensive Income Hedging and Derivative Financial Instruments — The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging Derivative instruments are recorded at fair value in the Consolidated Balance Sheets and are classified based on the contractual maturity of the instrument or the timing of the underlying cash flows. The fair value of derivative instruments is reflected in prepaid expenses and other current assets, other long-term assets or accrued expenses. On the Consolidated Statements of Cash Flows, cash flows associated with derivative instruments are classified according to the nature of the underlying hedged item. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship, whether the Company has elected to apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge that are exposed to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the earnings effect of the hedged forecasted transactions in a cash flow hedge. Changes in fair value of the cash flow hedges are recognized in the Consolidated Statements of Comprehensive Income in OCI. The Company may enter into derivative contracts that are intended to economically hedge certain of its risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. Derivative instruments that have not been designated in an effective hedging relationship are considered economic hedges, and their change in fair value is recognized in the Consolidated Statements of Operations in selling, general and administrative expense. In accordance with the FASB’s fair value measurement guidance, the Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio. See Note 14. Hedging and Derivative Financial Instruments Dividends— Stockholders’ Equity Revenue Recognition entrées The Company accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers The Company assesses the goods promised in its customers’ purchase orders and identifies a performance obligation for each promise to transfer a good (or bundle of goods) that is distinct. To identify the performance obligations, the Company considers all the goods promised, whether explicitly stated or implied based on customary business practices. Sales to customers generally do not include more than one performance obligation. When a contract does contain more than one performance obligation, the contract’s transaction price is allocated to each performance obligation based on its relative standalone selling price. The standalone selling price for each distinct good is generally determined by list price. Revenue is reported net of applicable discounts and allowances. Trade promotions are recorded as a reduction to net sales with a corresponding reduction to accounts receivable at the time of revenue recognition for the underlying sale. The recognition of trade promotions requires management to make estimates regarding the volume of incentive that will be redeemed and their total cost. Customers may deduct from future payments for defective or non-conforming products. As a result, a related refund liability is estimated and recorded as a reduction in sales. This return estimate is reviewed and updated each period and is based on historical sales and return experience. The Company has identified certain incremental costs to obtain a contract, primarily sales and broker commissions. The Company continues to expense these costs as incurred because the amortization period for the costs would be one year or less. The Company does not incur significant fulfillment costs requiring capitalization. The Company has elected the following practical expedients in accordance with ASC 606. ● Significant financing component – The Company has elected to not adjust the promised amount of consideration for the effects of significant financing components as the Company expects, at contract inception, that the period between the transfer of a promised good to a customer and when the customer pays for that good will be one year or less. ● Measurement of transaction price – The Company has elected to exclude from the measurement of transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the Company from a customer for sales taxes. ● Shipping and handling costs – The Company includes shipping and handling costs associated with outbound freight within cost of sales. These costs are accounted for as fulfillment costs as they are incurred. Advertising and Marketing Research and Development Equity-Based Compensation The Company determined the fair value of the Incentive Units as of the grant date and recognizes the compensation expense on a straight-line basis over the requisite service period, which is generally the vesting period of the Incentive Units. Certain Incentive Units have market and performance vesting conditions depending upon a change-in-control and achievement of certain metrics. The related compensation expense is recognized when the probability of the event is likely and performance criteria are met. In connection with the IPO, the Limited Partnership 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. In connection with the IPO, a change in vesting of the original performance-based IUs, and accordingly the related distributed restricted stock, was considered to be a modification to the grants and required the shares to be revalued using a Monte Carlo simulation model. Equity-based compensation expense is recognized for these awards on a straight-line basis over the service period, regardless of the eventual number of shares that are earned based upon the performance condition. Subsequent to the IPO, The fair value of the modified performance-based restricted stock awards was calculated using a Monte Carlo simulation option pricing model. Equity-Based Compensation Subsequent to the IPO, employees and certain nonemployees of the Company have received, and may in the future receive, equity-based compensation in the form of restricted stock units with service-based vesting conditions, using the fair market value of the Company’s common stock to measure fair value and in the form of restricted stock units with performance-based vesting conditions using a Monte Carlo simulation model to determine the grant-date fair value. Equity-based compensation expense is recognized on a straight-line basis over the requisite service period of the award based on their grant-date fair value. The Company recognizes forfeitures as they occur. Income Taxes Certain judgments, estimates, and assumptions could affect the carrying value of deferred tax assets and valuation allowances, if any, and deferred tax liabilities in the Company’s consolidated financial statements. We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740, Income Taxes Concentrations of Credit Risk— Credit risk for the Company was concentrated in three customers who each comprised more than 10% of the Company’s total sales for the fiscal years ended December 31, 2022, December 25, 2021 and December 26, 2020. Fiscal Year Ended December 31, 2022 December 25, 2021 December 26, 2020 Costco Wholesale Corporation 17% 18% 16% Walmart Inc. 13% 13% 13% United Natural Foods, Inc. 10% 11% N/A KeHE Distributors N/A N/A 11% N/A – Not applicable as the customer was not significant during these fiscal years. At December 31, 2022 and December 25, 2021, the following percentages of the Company’s accounts receivable, net were related to these significant customers for the periods in which the customers were significant: Fiscal Year Ended December 31, 2022 December 25, 2021 Costco Wholesale Corporation 32% 14% Walmart Inc. 15% 15% United Natural Foods, Inc. N/A N/A ____________ N/A – Not applicable as the customer was not significant during these fiscal years. No other customers individually had greater than 10% of total gross sales during these periods. The Company believes that there is no significant or unusual credit exposure at this time. Concentrations of Vendor Risk New Accounting Pronouncements and Policies Recently Issued Accounting Pronouncements Not Yet Adopted In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments-Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures fiscal years. The amendments of ASU 2022-02 require that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases. The Company expects the impact of this amendment to be administrative and does not anticipate any material impact to the consolidated financial statements. No other new accounting pronouncement issued or effective during the fiscal year had or is expected to have a material impact on the Company’s consolidated financial statements. |
Loss on Asset Sale
Loss on Asset Sale | 12 Months Ended |
Dec. 31, 2022 | |
Loss on Asset Sale | |
Loss on Asset Sale | Note On December 30, 2022, the Company completed the divestiture of the Birch Benders The divestiture of the Birch Benders For the fiscal year ended December 31, 2022, the Company recognized a pre-tax loss on the sale of Birch Benders (In thousands) Cash received $ 40,000 Assets sold: Inventory (5,424) Intangible assets, net (85,867) Total assets sold (91,291) Loss on asset sale $ (51,291) Birch Benders was part of the Company’s Breakfast and Snacks Reporting Segment. See Note 7. Goodwill |
Revenue Recognition
Revenue Recognition | 12 Months Ended |
Dec. 31, 2022 | |
Revenue Recognition | |
Revenue Recognition | Note Revenue disaggregated by brand is as follows: Fiscal Year Ended (In thousands) December 31, 2022 December 25, 2021 December 26, 2020 Rao’s $ 580,088 $ 419,966 $ 313,618 Noosa 176,166 163,476 153,492 Michael Angelo’s 80,925 79,414 83,896 Birch Benders 41,192 56,330 9,061 Total net sales $ 878,371 $ 719,186 $ 560,067 |
Inventories, Net
Inventories, Net | 12 Months Ended |
Dec. 31, 2022 | |
Inventories, Net | |
Inventories, Net | Note 5. Inventories , Net Inventories, net consisted of the following: (In thousands) December 31, 2022 December 25, 2021 Finished goods $ 76,404 $ 38,715 Raw materials and packaging supplies 16,198 12,900 Total inventories, net $ 92,602 $ 51,615 |
Property and Equipment, Net
Property and Equipment, Net | 12 Months Ended |
Dec. 31, 2022 | |
Property and Equipment, Net | |
Property and Equipment, Net | Note Property and equipment, net, consisted of the following: (In thousands) December 31, 2022 December 25, 2021 Machinery & equipment $ 63,077 $ 45,329 Leasehold improvements 40,288 39,296 Construction in progress 6,384 12,074 Furniture & fixtures 1,605 2,119 Other 1,415 1,649 Gross property and equipment 112,769 100,467 Less: Accumulated depreciation and amortization 48,452 37,796 Property and equipment, net $ 64,317 $ 62,671 Depreciation and amortization expense was approximately $11.6 million, $10.6 million and $10.6 million for the fiscal years ended December 31, 2022, December 25, 2021 and December 26, 2020, respectively, of which $10.1 million, $8.9 million and $9.1 million was recorded to cost of sales for the fiscal years ended December 31, 2022, December 25, 2021 and December 26, 2020, respectively. |
Goodwill
Goodwill | 12 Months Ended |
Dec. 31, 2022 | |
Goodwill. | |
Goodwill | Note Changes in the carrying value of goodwill during the fiscal years ended December 31, 2022 and December 25, 2021 were as follows: (In thousands) Goodwill Balance as of December 26, 2020 $ 437,290 Purchase accounting adjustments 161 Balance as of December 25, 2021 $ 437,451 Impairment (42,052) Balance as of December 31, 2022 $ 395,399 In the second quarter of fiscal 2022, the Company identified the underperformance of the Birch Benders reporting unit as an indicator that required a quantitative assessment to be performed. The Company compared the estimated fair value of the Birch Benders reporting unit to the carrying value of its assets and liabilities, including goodwill. The fair value was established using generally accepted valuation methodologies, including discounted cash flow analysis and comparable public company analysis, both methods weighted equally. It was determined that the carrying value of the goodwill exceeded the Company’s estimate of the implied fair value of goodwill. As a result, the Company recorded an impairment charge for the full amount of goodwill, $42.1 million, during the fiscal year ended December 31, 2022. For goodwill impairment testing for the fiscal years ended December 31, 2022 and December 25, 2021, the Company determined it had three reporting units: Rao's / Michael Angelo’s (combined), Noosa and Birch Benders. In the fourth quarter of fiscal 2022, the Company performed a qualitative analysis of the goodwill for Rao’s/ Michael Angelo’s and Noosa. The qualitative assessment did not identify indicators of impairment, and it was determined that it was more likely than not the reporting units had a fair value in excess of their carrying value. Accordingly, no further impairment assessment was necessary, and the Company determined their reporting units were not impaired. There were no further impairment charges related to goodwill in the fiscal year ended December 31, 2022. There were no impairment charges related to goodwill during the fiscal years ended December 25, 2021 and December 26, 2020. |
Intangible Assets, Net
Intangible Assets, Net | 12 Months Ended |
Dec. 31, 2022 | |
Intangible Assets, Net | |
Intangible Assets, Net | Note 8. Intangible Assets, Net Intangible assets, net, consisted of the following: December 31, 2022 Gross carrying Accumulated Sale of Net carrying (In thousands) amount amortization intangible assets amount Intangible assets - definite lives Customer relationships $ 213,000 $ 89,201 $ 5,082 $ 118,717 Tradename 192,347 31,732 80,785 79,830 405,347 120,933 85,867 198,547 Intangible assets - indefinite lives Tradename 153,000 — — 153,000 Total intangible assets $ 558,347 $ 120,933 $ 85,867 $ 351,547 December 25, 2021 Gross carrying Accumulated Net carrying (In thousands) amount amortization amount Intangible assets - definite lives Customer relationships $ 213,000 $ 71,330 $ 141,670 Tradename 192,347 22,362 169,985 405,347 93,692 311,655 Intangible assets - indefinite lives Tradename 153,000 — 153,000 Total intangible assets $ 558,347 $ 93,692 $ 464,655 In connection with the divestiture of the Birch Benders Loss on Asset Sale Amortization expense was approximately $27.2 million, $27.2 million and $23.2 million for the fiscal years ended December 31, 2022, December 25, 2021and December 26, 2020, respectively, of which all was included in selling, general and administrative expense in the Consolidated Statements of Operations. In the fourth quarter of fiscal 2022, the Company performed a qualitative analysis of the indefinite-lived intangible assets. The qualitative assessment did not identify indicators of impairment, and it was determined that it was more likely than not that the indefinite-lived intangible assets had fair values in excess of their carrying values. Accordingly, no further impairment assessment was necessary. There were no impairment charges related to indefinite-lived intangible assets recognized in the fiscal years ended December 31, 2022, December 25, 2021 and December 26, 2020, respectively. Estimated total intangible amortization expense during the next five fiscal years and thereafter is as follows: (In thousands) Amortization 2023 $ 22,425 2024 22,425 2025 22,425 2026 22,425 2027 17,782 Thereafter 91,065 Total $ 198,547 |
Accrued Expenses
Accrued Expenses | 12 Months Ended |
Dec. 31, 2022 | |
Accrued Expenses | |
Accrued Expenses | Note 9. Accrued Expenses Accrued expenses consisted of the following: (In thousands) December 31, 2022 December 25, 2021 Accrued trade $ 32,337 $ 23,122 Accrued general expense 17,911 15,327 Accrued compensation and benefits 17,328 10,478 Accrued marketing 1,995 2,830 Total accrued expenses $ 69,571 $ 51,757 |
Long-Term Debt
Long-Term Debt | 12 Months Ended |
Dec. 31, 2022 | |
Long-Term Debt | |
Long-Term Debt | Note Long-term debt consisted of the following: December 31, 2022 Unamortized debt issuance (In thousands) Principal costs Total debt, net Initial First Lien Term Loan Facility $ 480,800 $ (5,374) $ 475,426 Finance lease liabilities 7,017 — 7,017 Total debt $ 487,817 $ (5,374) 482,443 Less: current portion of finance lease liabilities 99 Total long-term debt $ 482,344 December 25, 2021 Unamortized debt issuance (In thousands) Principal costs Total debt, net Senior debt $ 480,800 $ (6,377) $ 474,423 Finance lease liabilities 7,095 — 7,095 Total debt $ 487,895 $ (6,377) 481,518 Less: current portion of finance lease liabilities 98 Long-term debt $ 481,420 Senior Debt In November 2018, in conjunction with the acquisition of Noosa, Sovos Brands Intermediate, Inc. (“Sovos Intermediate”) entered into a Credit Facility Agreement with a term loan of $280 million (“2018 Term Loan”) and a revolving line of credit of $45 million (“Revolving Line of Credit”). In October 2020, Sovos Intermediate entered into an amendment to its Credit Agreement that provided, among other things, for an additional $100.0 million term loan (the “Incremental Term Loan”). In June 2021, Sovos Intermediate Sovos Intermediate Sovos Intermediate Stockholders’ 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. In September 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, in September 2021 and October 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. The amortization of debt issuance costs and discount of $1.2 million, $1.9 million and $1.8 million for the fiscal years ended December 31, 2022, December 25, 2021 and December 26, 2020, respectively, is included within interest expense in the Consolidated Statements of Operations. The interest rate for the Initial First Lien Term Loan Facility and Revolving Facility is London Inter-Bank Offered Rate (“LIBO Rate”) plus an applicable rate contingent on the Company’s calculated first lien leverage ratio, ranging from 400 to 425 basis points, and was subject to a 50 basis points reduction, at each level, after the consummation of its IPO. In no event shall the LIBO Rate be less than 0.75% per annum for the Initial First Lien Term Loan Facility or less than 0.00% per annum for the Revolving Line of Credit. The Initial First Lien Term Loan Facility matures on June 8, 2028 and the Revolving Facility matures on June 8, 2026. The Initial First Lien Term Loan Facility is collateralized by substantially all of the assets of the Company. On December 30, 2022, Sovos Intermediate and Birch Benders, LLC, a Delaware limited liability company, sold the Birch Benders The interest rate for the Initial Second Lien Facility was LIBO Rate plus 8.00% per annum and was subject to a 25 basis points reduction after the consummation of an IPO. In no event could the LIBO Rate be less than 0.75% per annum. The Initial Second Lien Facility was originally scheduled to mature on June 8, 2029 and was collateralized by substantially all of the assets of the Company. As described above, in September 2021, the Initial Second Lien Facility was paid in full. The Company had available credit of $125 million under the Revolving Facility as of December 31, 2022 and December 25, 2021, respectively. There was zero outstanding on the Company’s Revolving Credit Facilities as of December 31, 2022 or December 25, 2022. As of December 31, 2022 and December 25, 2021, the effective interest rate for the Initial First Lien Term Loan Facility and Revolving Facility was 7.91% and 4.50%, respectively. As of December 31, 2022, the future minimum principal payments for the next five years and thereafter are as follows: Fiscal Year Ending (In thousands) 2023 $ — 2024 — 2025 — 2026 — 2027 — Thereafter 480,800 Total $ 480,800 Loan Covenants In connection with the First 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 “equity cure” 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 December 31, 2022, the Company had no outstanding revolving loans, and did not meet the requirement to test the financial covenant under the First Lien Credit Agreement. 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. See Note 11. Leases Related Party Transactions |
Leases
Leases | 12 Months Ended |
Dec. 31, 2022 | |
Leases | |
Leases | Note The Company leases distribution centers, manufacturing facilities, equipment, and office space. Generally, the term for leases ranges from 2 10 years 5 years 2 30 years Operating and finance lease costs are included within Cost of sales and Selling, general, and administrative expenses in the Consolidated Statements of Operations. The components of lease expense were as follows: Fiscal Year Ended (In thousands) Statement of Operations Caption December 31, 2022 December 25, 2021 Operating lease cost: Lease cost Cost of sales and Selling, general and administrative $ 3,313 $ 3,266 Variable lease cost (1) Cost of sales and Selling, general and administrative 1,418 1,384 Total operating lease cost 4,731 4,650 Short term lease cost Cost of sales and Selling, general and administrative 240 222 Finance lease cost: Amortization of right-of-use assets Cost of sales and Selling, general and administrative 261 261 Interest on lease liabilities Interest expense, net 530 532 Total finance lease cost 791 793 Total lease cost $ 5,762 $ 5,665 (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: (In thousands) Balance Sheet Caption December 31, 2022 December 25, 2021 Assets Operating lease right-of-use assets Operating lease right-of-use assets $ 13,332 $ 15,672 Finance lease right-of-use assets Property and equipment, net 6,038 6,299 Total lease assets $ 19,370 $ 21,971 Liabilities Current: Operating lease liabilities Current portion of long-term operating lease liabilities $ 3,308 $ 3,216 Finance lease liabilities Current portion of long-term debt 99 98 Long-term: Operating lease liabilities Long-term operating lease liabilities 14,063 17,302 Finance lease liabilities Long-term debt, net of debt issuance costs 6,918 6,997 Total lease liabilities $ 24,388 $ 27,613 The weighted-average remaining lease term and weighted-average discount rate for operating and finance leases were as follows: December 31, 2022 December 25, 2021 Weighted-average remaining lease term (in years): Operating leases 6.4 7.1 Finance leases 34.2 34.8 Weighted-average discount rate Operating leases 4.9 % 4.9 % Finance leases 7.8 % 7.8 % Future maturities of lease liabilities as of December 31, 2022 are as follows: (In thousands) Operating Leases Finance Leases Fiscal year ending: 2023 $ 4,062 $ 609 2024 3,493 557 2025 2,982 549 2026 3,005 520 2027 3,064 525 Thereafter 3,856 18,445 Total lease payments 20,462 21,205 Less: Interest (3,091) (14,188) Present value of lease liabilities $ 17,371 $ 7,017 As of December 31, 2022, 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: Fiscal Year Ended (In thousands) December 31, 2022 December 25, 2021 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 4,045 $ 3,893 Operating cash flows from finance leases 530 532 Financing cash flows from finance leases 78 $ 66 Right-of-use assets obtained in exchange for new lease liabilities Finance leases — — Operating leases 78 1,638 |
Commitments and Contingencies
Commitments and Contingencies | Dec. 31, 2022 |
Commitments and Contingencies. | |
Commitments and Contingencies | Note 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 The Company has third-party purchase obligations for raw materials, packaging, and co-manufacturing. These commitments have been entered into based on future projected needs. For the fiscal years ended December 31, 2022 and December 25, 2021, the Company made third-party purchases in the amount of $3.0 million and $2.4 million, respectively, under purchase commitments. As of December 31, 2022, the Company had outstanding minimum purchase commitments with one supplier. The estimated annual minimum purchase commitments with the supplier are as follows: Fiscal Year Ending (In thousands) 2023 $ 3,500 2024 3,500 2025 2,375 2026 — 2027 — Thereafter — Total $ 9,375 See Note 19. Related Party Transactions |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 12 Months Ended |
Dec. 31, 2022 | |
Fair Value of Financial Instruments | |
Fair Value of Financial Instruments | Note ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), 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, current assets and current liabilities Cash and cash equivalents, accounts receivable, prepaid expenses, accounts payable and accrued expenses are reflected in the Consolidated Balance Sheets at carrying value, which approximates fair value due to the short-term nature of these instruments. Borrowing instruments The Company’s borrowing instruments are recorded at their carrying values in the Consolidated Balance Sheets, which may differ from their respective fair values. The carrying values and estimated fair values of the Company’s Initial First Lien Term Loan Facility and Revolving Facility approximate their carrying values as of December 31, 2022 and December 25, 2021, based on interest rates currently available to the Company for similar borrowings. Derivative financial instruments The Company uses option contracts to manage foreign currency risk and uses interest rate caps (options) to manage interest rate risk. The Company’s derivative assets and liabilities are carried at fair value as required by GAAP. The estimated fair values of the derivative assets and liabilities on the Company’s forward contracts are based on foreign currency exchange rates in active markets. The estimated fair value of the interest rate instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. To comply with the provisions of ASC 820, we incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts and guarantees. Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by ourself and our counterparties. We have determined that the significance of the impact of the credit valuation adjustments made to our derivative contracts, which determination was based on the fair value of each individual contract, was not significant to the overall valuation. As a result, all of our derivatives held as of December 31, 2022 were classified as Level 2 of the fair value hierarchy. There were no derivative financial instruments as of December 25, 2021. The table below presents the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2022, aggregated by the level in the fair value hierarchy within which those measurements fall. Fair Value Measurements Using (In thousands) Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Balance at December 31, 2022 Assets Derivatives in cash flow hedging relationships $ — $ 3,628 $ — $ 3,628 Total assets $ — $ 3,628 $ — $ 3,628 Liabilities Derivatives not designated as hedging instruments $ — $ 33 $ — $ 33 Total liabilities $ — $ 33 $ — $ 33 The fair value estimates presented herein are based on information available to management as of December 31, 2022. These estimates are not necessarily indicative of the amounts we could ultimately realize. See Note 14. Hedging and Derivative Financial Instruments Non-financial assets The Company’s non-financial assets, which primarily consist of property and equipment, right-of-use assets, goodwill and other intangible assets, are not required to be carried at fair value on a recurring basis and are reported at carrying value. The fair values of these assets are determined, as required, based on Level 3 measurements, including estimates of the amount and timing of future cash flows based upon historical experience, expected market conditions, and management’s plans. In the second quarter of fiscal 2022, the Company determined that the carrying value of the Birch Benders goodwill exceeded its estimate of the implied fair value of goodwill. As a result, the Company recorded an impairment charge for the full amount of goodwill, $42.1 million. See Note 7. Goodwill Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to goodwill, intangibles, and property and equipment, which are remeasured when the derived fair value is below the carrying value on the Company’s Consolidated Balance Sheets. For these assets, the Company does not periodically adjust carrying value to fair value except in the event of impairment. When the impairment has occurred, the Company measures the required charges and adjusts the carrying value as discussed in Note 2. Summary of Significant Accounting Policies Goodwill Intangible Assets, Net There were no transfers of financial instruments between the three levels of fair value hierarchy during the fiscal years ended December 31, 2022 and December 25, 2021. |
Hedging and Derivative Financia
Hedging and Derivative Financial Instruments | 12 Months Ended |
Dec. 31, 2022 | |
Hedging and Derivative Financial Instruments | |
Hedging and Derivative Financial Instruments | Note 14. Hedging and Derivative Financial Instruments The Company is directly and indirectly affected by changes in certain market conditions. These changes in market conditions may adversely impact the Company’s financial performance and are referred to as “market risks.” When deemed appropriate, the Company uses derivatives as a risk management tool to mitigate the potential impact of certain market risks. The primary market risk managed by the Company through the use of derivative instruments is foreign currency exchange rate risk and interest rate risk. The Company uses various types of derivative instruments including, but not limited to, option contracts, collars and interest rate caps. An option contract is an agreement that conveys the purchaser the right, but not the obligation, to buy or sell a quantity of a currency or commodity at a predetermined rate or price during a period or at a time in the future. A collar is a strategy that uses a combination of options to limit the range of possible positive or negative returns on an underlying asset or liability to a specific range, or to protect expected future cash flows. To do this, an investor simultaneously buys a put option and sells (writes) a call option, or alternatively buys a call option and sells (writes) a put option. An interest rate cap involves the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium. We do not enter into derivative financial instruments for trading purposes. All derivative instruments are carried at fair value in the Consolidated Balance Sheets, primarily in the following line items, as applicable: prepaid expenses and other current assets, other long-term assets and accrued expenses. The carrying values of the derivatives reflect the impact of netting agreements. These netting agreements allow the Company to net settle positive and negative positions (assets and liabilities) arising from different transactions with the same counterparty. The accounting for gains and losses that result from changes in the fair values of derivative instruments depends on whether the derivatives have been designated and qualify as hedging instruments and the type of hedging relationships. Derivatives can be designated as fair value hedges, cash flow hedges or economic hedges. The interest rate cap derivative is designated and qualifies as a cash flow hedge. The foreign currency derivative instruments are considered an economic hedge as they do not qualify for hedge accounting treatment. The Company determines the fair values of its derivatives based on quoted market prices or pricing models using current market rates. The notional amounts of the derivative financial instruments do not necessarily represent amounts exchanged by the parties and, therefore, are not a direct measure of our exposure to the financial risks described above. The amounts exchanged are calculated by reference to the notional amounts and by other terms of the derivatives, such as interest rates or foreign currency exchange rates. The Company does not view the fair values of its derivatives in isolation but rather in relation to the fair values or cash flows of the underlying hedged transactions or other exposures. Virtually all our derivatives are straightforward over-the-counter instruments with liquid markets. See Note 13. Fair Value of Financial Instruments Cash Flow Hedges of Interest Rate Risk The Company’s objectives in using interest rate derivatives are to add stability to interest expense and manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate caps as part of its interest rate risk management strategy. Interest rate caps designated as cash flow hedges involve the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium. During the fiscal year ended December 31, 2022, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in OCI in the Consolidated Statements of Other Comprehensive Income and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings. Amounts reported in OCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. Over the next 12 months, the Company estimates that an additional $1.4 million will be reclassified as a reduction to interest expense. During the fiscal year ended December 31, 2022, the Company entered into a cash flow hedge to manage interest rate risk on its variable rate under the Initial First Lien Term Loan Facility. As of December 31, 2022, the Company had one LIBOR interest rate cap agreement with a total hedged notional amount of $240.0 million that was designated as a cash flow hedge of interest rate risk. The interest rate cap has a strike price of 4.00% and a maturity date of July 31, 2024. The interest rate cap was determined to be fully effective during all periods presented. Within the Company’s Consolidated Balance Sheets, the interest rate cap is recorded at fair value. The cash flows related to the interest rate caps are classified as operating activities in the Consolidated Statements of Cash Flows. Economic (Non-Designated) Hedging Strategy The Company uses certain derivatives as economic hedges of foreign currency. Although these derivatives did not qualify for hedge accounting, they are effective economic hedges. The Company uses foreign currency economic hedges to offset the earnings impact that fluctuations in foreign currency exchange rates have on certain monetary assets and liabilities denominated in nonfunctional currencies outside of a contractually agreed upon foreign exchange rate range. The total notional values of derivatives related to our foreign currency economic hedges were $145.7 million and $0 as of December 31, 2022 and December 25, 2021, respectively. The changes in the fair values of economic hedges used to offset those monetary assets and liabilities are immediately recognized in earnings in the selling, general and administrative line item in our Consolidated Statements of Operations. Within the Company’s Consolidated Balance Sheets, the foreign currency economic hedges are recorded at fair value. The cash flows related to the foreign currency economic hedges are classified as operating activities in the Consolidated Statements of Cash Flows. The following table presents the fair values of the Company’s derivative instruments: December 31, 2022 December 25, 2021 (In thousands) Location Derivative Assets Derivative Liabilities Derivative Assets Derivative Liabilities Derivatives not designated as hedging instruments under Subtopic 815-20 Foreign currency contracts (1) Accrued expenses $ — $ 33 $ — $ — Total derivatives not designated as hedging instruments $ — $ 33 $ — $ — Derivatives designated as hedging instruments under Subtopic 815-20 Interest rate caps - short term Prepaid expenses and other current assets $ 1,997 $ — $ — $ — Interest rate caps - long term Other long-term assets 1,631 — — — Total derivatives designated as hedging instruments $ 3,628 $ — $ — $ — Total derivatives $ 3,628 $ 33 $ — $ — (1) Derivative instruments within this category are subject to master netting arrangements and are presented on a net basis in the Consolidated Balance Sheets in accordance with ASC 210, Balance Sheet, Subtopic 210-20. See tables below showing the effects of offsetting derivative assets and liabilities. The following table presents the pre-tax effect of cash flow hedge accounting on accumulated OCI for the periods presented: (In thousands) Amount of Gain or (Loss) Recognized in OCI Fiscal Year Ended Derivatives in Subtopic 815-20 Hedging Relationships December 31, 2022 December 25, 2021 December 26, 2020 Derivatives in cash flow hedging relationships Interest rate caps $ 2,150 $ — $ — (In thousands) Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income Fiscal Year Ended Location of Gain or (Loss) Reclassified from Accumulated OCI into Income December 31, 2022 December 25, 2021 December 26, 2020 Derivatives in cash flow hedging relationships Interest expense, net $ 112 $ — $ — The following table presents the effect of the Company’s derivative financial instruments on the Consolidated Statements of Operations for the periods presented: Gain (Loss) Recognized Fiscal Year Ended December 31, December 25, December 26, (In thousands) Statement of Operations Location 2022 2021 2020 Total amounts of expense presented in the Statements of Operations in which the derivatives not designated as hedging are recorded Selling, general and administrative $ 163,025 $ 135,060 $ 124,612 The effects of derivatives not designated as hedging instruments under Subtopic 815-20: Foreign currency contracts Selling, general and administrative (33) — — Total amounts of expense presented in the Statements of Operations in which the derivatives designated as hedging are recorded Interest expense, net 27,851 30,885 19,895 The effects of derivatives designated as hedging instruments under Subtopic 815-20: Interest rate caps Interest expense, net 112 — — The net amounts of derivative assets or liabilities in the tables below can be reconciled to the tabular disclosure of fair value which provides the location that derivative assets and liabilities are presented on the Consolidated Balance Sheets. The following tables present a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives as of December 31, 2022. The Company had no derivatives Offsetting of Derivative Assets As of December 31, 2022 (In thousands) Gross Amounts Not Offset in the Balance Sheet Gross Amounts of Recognized Assets Gross Amounts Offset in the Balance Sheet Net Amounts of Assets Presented in the Balance Sheet Financial Instruments Cash Collateral Posted Gross Amounts of Recognized Assets Derivatives Foreign currency contracts $ 56 $ (56) $ — $ — $ — $ — Total derivatives, subject to a master netting arrangement 56 (56) — — — — Total derivatives, not subject to a master netting arrangement 3,628 — — — 3,628 Total derivatives $ 3,684 $ (56) $ $ — $ — $ 3,628 Offsetting of Derivative Liabilities As of December 31, 2022 (In thousands) Gross Amounts Not Offset in the Balance Sheet Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Balance Sheet Net Amounts of Liabilities Presented in the Balance Sheet ' Financial Instruments Cash Collateral Posted Net Amount Derivatives Foreign currency contracts $ (89) $ 56 $ (33) $ — $ — $ (33) Total derivatives, subject to a master netting arrangement (89) 56 (33) — — (33) Total derivatives, not subject to a master netting arrangement — — — — — — Total derivatives $ (89) $ 56 $ (33) $ — $ — $ (33) |
Stockholders' Equity
Stockholders' Equity | 12 Months Ended |
Dec. 31, 2022 | |
Stockholders' Equity | |
Stockholders' Equity | Note 15. Stockholders’ Equity Dividend distribution On June 8, 2021, the Company paid a one-time cash dividend to the Limited Partnership. The total amount of the dividend was $400 million and was recorded against APIC. Stock split On September 8, 2021, the Company filed a certificate of amendment to its Certificate of Incorporation (“Certificate of Amendment”) 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 “Stock Split”), 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 Limited Partnership 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 (“Amended and Restated Charter”) 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. Organizational Transactions 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. 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. On August 10, 2022, the Company completed a secondary offering, in which certain of its stockholders (the “Selling Stockholders”) sold 8,500,000 shares of common stock in an underwritten public offering at an offering price of $14.00 per share, with all proceeds going to the Selling Stockholders. Subsequent to the secondary offering, the underwriters exercised their option to purchase an additional 1,275,000 shares of common stock, and the sale of such additional shares closed on August 22, 2022, with all proceeds going to the Selling Stockholders. As a result of the IPO, secondary offering and the exercise of the underwriters’ option to purchase additional shares, the new investors in the Company own 36,609,100 shares of the common stock, or approximately 36.2% of the total 101,214,297 shares of common stock outstanding as of March 8, 2023. |
Equity-Based Compensation
Equity-Based Compensation | 12 Months Ended |
Dec. 31, 2022 | |
Equity-Based Compensation. | |
Equity-Based Compensation | Note 16. Equity-Based Compensation Pre-IPO Equity 2017 Equity Incentive Plan In 2017, the Sovos Brands Limited Partnership 2017 Equity Incentive Plan (“2017 Plan”), was established providing certain employees and nonemployees of the Company equity-based compensation in the form of Incentive Units (“IUs”) of the Limited Partnership, as consideration for services to the Company. The IUs, were deemed to be equity instruments subject to expense recognition under FASB ASC 718, Compensation — Stock Compensation. The estimate of fair value of the IUs granted was determined as of the grant date. The fair value of the IUs granted in 2019 and 2020 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. Significant assumptions used to estimate the fair value of the Incentive Units were as follows, which were the same between service based and performance-based shares: Fiscal Year Ended December 25, 2021 December 26, 2020 Expected term 1.5 to 3.5 yrs 1.5 to 3.5 yrs Risk-free rate of return 1.61% 1.61% Applied volatility 20% 20% The expected term represents management’s estimate of time to an exit event. The risk-free rate of return is based upon the US Treasury yield through time to liquidity. Applied volatility is based on the volatility of a sample of publicly traded companies in markets similar to Sovos Brands Holdings, Inc. The fair value of the IUs granted in 2021 was estimated using the Probability Weighted Expected Return Method (“PWERM”), which is a forward-looking approach that was considered to be appropriate when expected future liquidity events, such as an IPO, are reasonably certain. The PWERM analysis considered three potential liquidation time horizons, ranging from current value to three years and assigned a 33.3% probability to each scenario. The valuation of the total company enterprise and equity values was calculated for each of the three scenarios, and then applied a weighted average calculation. The IUs’ activity for the fiscal year ended December 25, 2021 were as follows: Service Based Performance Based Weighted Average Weighted Average Incentive Grant Date Incentive Grant Date Units Fair Value Units Fair Value Outstanding at December 26, 2020 34,659 $ 245 46,000 $ 15 Granted 1,231 842 1,722 8 Forfeited (332) 407 (908) 13 Distribution of common stock with respect to IUs (1) (35,558) 264 (46,814) 14 Outstanding at December 25, 2021 — $ — — $ — Vested at December 25, 2021 — — — — (1) In connection with the IPO, the Limited Partnership 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. Distribution of Sovos Common Stock with respect to IUs 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 nonvested IUs, with the vesting of such restricted common stock tracking the same vesting terms as the related nonvested IUs at the time of distribution. The distribution of Sovos common stock with respect to IUs was calculated based on a multi-step valuation which included a comparison of the fair value of the Company based on the pricing at the Company’s IPO to the fair value of the outstanding partnership units of the Limited Partnership, including the IUs granted under the 2017 Plan. The conversion was based on: ● a ratio that takes into account the number of IUs held, ● the application distribution threshold applicable to the IUs, and ● the value of distributions that the holder would have been entitled to receive had the Limited Partnership liquidated on the date of such replacement in accordance with the terms of the distribution “waterfall” set forth in the Partnership Agreement. Restricted Common Stock The following table summarizes our restricted common stock activity during the fiscal years ended December 31, 2022 and December 25, 2021: Service Based Performance Based Weighted Average Weighted Average Restricted Grant Date Restricted Grant Date Common Stock Fair Value Common Stock Fair Value Nonvested at December 26, 2020 — $ — — $ — Distribution of restricted common stock (1)(2) 94,646 12.00 3,319,291 3.91 Granted — — — — Vested (18,558) 12.00 (683,442) 7.86 Forfeited back to the Limited Partnership (3) (3,847) 12.00 (45,001) 2.89 Nonvested at December 25, 2021 72,241 $ 12.00 2,590,848 $ 5.25 Granted — — — — Vested (63,548) 12.00 (276,008) 13.29 Forfeited back to the Limited Partnership (3) (1,229) 12.00 (371,974) 4.98 Nonvested at December 31, 2022 7,464 12.00 1,942,866 4.15 Vested at December 31, 2022 791,012 $ 12.00 959,450 $ 9.42 (1) The service-based restricted common stock excludes 708,906 shares that vested prior to distribution. None of the performance-based restricted common stock vested prior to distribution. (2) The weighted average grant date fair value for the performance-based restricted common stock at distribution was based on the 2.0 x multiple of invested capital (“MOIC”) modification described below. A subsequent modification in November 2021 to the 4.0 x MOIC restricted common stock resulted in an increase in the weighted average grant date fair value for those shares to $15.15 per share. (3) S hares of restricted common stock that do not vest are not cancelled but instead remain outstanding and are forfeited back to the Limited Partnership. 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 2.0 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 this modification, a portion of the shares that would have vested based upon a 4.0 The fair value of the modified 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, resulting in a modified grant date fair value of approximately $6.1 million. As of December 31, 2022, 7,464 shares of restricted common stock resulting from the distribution of common stock with respect to nonvested time-based IUs vest upon fulfilling time-based service conditions and are scheduled to vest through 2024. As of December 31, 2022, of the remaining 1,942,866 shares of restricted common stock resulting from the distribution with respect to nonvested performance-based IUs, 169,698 shares will vest on the earlier of December 30, 2023 or when the original performance condition is achieved and the remaining 1,776,168 shares will vest only if certain performance conditions, including exceeding various MOIC levels, are achieved. The equity-based compensation expense prior to the IPO was considered to be a transaction with the Limited Partnership and was classified as a component within additional paid-in capital in the Company’s consolidated statements of changes in stockholder’s equity. Post-IPO Equity 2021 Equity Incentive Plan Effective September 21, 2021, the Company approved the 2021 Equity Incentive Plan (the “2021 Plan”) 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 equity-based awards to eligible employees, consultants and directors. Restricted Stock Units The Company has issued restricted stock units (“RSUs”) under the 2021 Plan. The following table summarizes our restricted stock unit activity during the fiscal years ended December 31, 2022 and December 25, 2021: Weighted Average Restricted Stock Grant Date Units Fair Value Outstanding at December 26, 2020 — $ — Granted 967,158 12.00 Vested — — Forfeited (39,936) 12.00 Outstanding at December 25, 2021 927,222 12.00 Granted 946,949 14.06 Vested (75,363) 12.07 Forfeited (181,793) 12.48 Outstanding at December 31, 2022 1,617,015 $ 13.15 Vested at December 31, 2022 75,363 $ 12.07 In connection with the IPO, and under the 2021 Plan, the Company granted 967,158 time-based RSUs 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 employee’s 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 employee’s or director’s 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 in general to the applicable director’s continued service through the vesting date. During the fiscal year ended December 31, 2022, the Company granted 946,949 time-based RSUs to certain employees and independent directors. The RSUs include (i) 604,833 RSUs issued to employees with each award vesting in two equal annual installments, (ii) 314,306 RSUs issued to employees with each award vesting in three annual installments, and (iii) 27,810 RSUs issued to independent directors that vest on the earlier of the first anniversary of the grant date and immediately prior to our 2023 annual meeting of stockholders, all of which are subject in general to the employee’s and independent director’s continued service through the vesting date. Performance-based Restricted Stock Units The Company has issued performance-based restricted stock units (“PSUs”) under the 2021 Plan. The following table summarizes our performance-based restricted stock unit activity during the fiscal years ended December 31, 2022 and December 25, 2021: Performance-based Weighted Average Restricted Stock Grant Date Units Fair Value Outstanding at December 26, 2020 — $ — Granted 687,690 7.09 Vested — — Forfeited (5,728) 7.09 Outstanding at December 25, 2021 681,962 7.09 Granted 423,222 15.63 Vested — — Forfeited (130,493) 8.58 Outstanding at December 31, 2022 974,691 $ 10.60 Vested at December 31, 2022 — $ — In connection with the IPO and under the 2021 Plan, the Company granted 687,690 PSUs to certain employees with each award vesting subject in general to the achievement of the performance condition and subject in general to the employee’s 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. During the fiscal year ended December 31, 2022, the Company granted 343,800 PSUs to employees with each award vesting subject in general to the achievement of a performance condition that measures the total shareholder return (“TSR”) relative to the TSR of the constituents of a custom peer group (“relative TSR”). The number of shares that may be earned ranges from 0% to 200% with straight-line interpolation applied and subject in general to the employee’s continued service through the vesting date. During the fiscal year ended December 31, 2022, the Company also granted 79,422 PSUs to an employee subject in general to the achievement of the performance condition and subject to the employee’s continued service through the vesting date. The fair value of the PSUs granted during the fiscal year ended December 31, 2022 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 December 31, 2022, there was an aggregate of 7,072,175 shares of common stock available for future equity awards under the 2021 Plan. Equity-based Compensation Expense The Company grants equity-based compensation awards to certain employees, officers and non-employee directors as long-term incentive compensation and recognizes the related expense for these awards ratably over the applicable vesting period. Such expense is recognized as a selling, general and administrative expense in the Consolidated Statements of Operations. The following table summarizes the equity-based compensation expense recognized for the Company’s equity plans: Fiscal Year Ended (In thousands) December 31, 2022 December 25, 2021 Equity awards under the 2017 Plan (Pre-IPO) RSAs $ 1,103 $ 1,750 PSAs 6,677 6,688 Total equity-based compensation expense for the 2017 Plan 7,780 8,438 Equity awards under the 2021 Plan (Post-IPO) RSUs 7,425 982 PSUs 3,233 404 Total equity-based compensation expense for the 2021 Plan 10,658 1,386 Total equity-based compensation expense $ 18,438 $ 9,824 The Company expects to record equity-based compensation expense of approximately $27.2 million through the fourth quarter of 2025 resulting from the issuance of the RSAs and PSAs under the 2017 Plan and RSUs and PSUs under the 2021 Plan. See Note 21. Subsequent Events |
Employee Benefits
Employee Benefits | 12 Months Ended |
Dec. 31, 2022 | |
Employee Benefits | |
Employee Benefits | Note 17. Employee Benefits The Company sponsors a defined contribution plan. Company contributions to this defined contribution plan are based on employee contributions and compensation. The Company’s contributions to this plan for the fiscal years ended December 31, 2022, December 25, 2021 and December 26, 2020 were $1.8 million, $1.8 million and $1.4 million, respectively. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2022 | |
Income Taxes | |
Income Taxes | Note Income tax (expense) benefit consists of the following: Fiscal Year Ended (In thousands) December 31, 2022 December 25, 2021 December 26, 2020 Current: Federal $ — $ (641) $ — State (933) (791) (1,928) Total current tax (expense) (933) (1,432) (1,928) Deferred: Federal 10,229 (3,414) (805) State 3,592 1,171 (3,944) Total deferred tax (expense) benefit 13,821 (2,243) (4,749) Income tax (expense) benefit $ 12,888 $ (3,675) $ (6,677) Total income tax (expense) benefit in fiscal 2022, 2021 and 2020 varies from the amounts computed by applying the federal statutory income tax rate of 21% to income (loss) before income taxes primarily due to the following items: Fiscal Year Ended (In thousands) December 31, 2022 December 25, 2021 December 26, 2020 United States statutory income tax (expense) benefit $ 13,931 21.0 % $ (1,175) 21.0 % $ (3,676) 21.0 % State tax (expense) benefit, net of federal tax 966 1.5 (910) 16.3 (781) 4.5 Transaction costs — — 312 (5.6) 2,763 (15.8) Equity-based compensation (1,634) (2.5) (1,772) 31.7 (406) 2.3 Nondeductible executive compensation (912) (1.4) (625) 11.2 — — Other permanent items (597) (0.9) (180) 3.2 (113) 0.6 Remeasurement of deferred tax balances 1,150 1.7 993 (17.7) (3,388) 19.4 Unrecognized tax (expense) benefit 5 — 121 (2.2) (609) 3.5 Return to provision (412) (0.6) (236) 4.2 (81) 0.5 Deferred income tax adjustments 164 0.2 (200) 3.6 (450) 2.6 Research and development credit 281 0.4 — — — — Other, net (54) (0.1) (3) 0.1 64 (0.4) Income tax (expense) benefit $ 12,888 19.3 % $ (3,675) 65.8 % $ (6,677) 38.2 % Deferred tax assets and liabilities reflect the tax effect of temporary differences between the carrying value of assets and liabilities for financial reporting purposes and the tax basis of these assets and liabilities as measured by income tax law. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below: Fiscal Year Ended (In thousands) December 31, 2022 December 25, 2021 Deferred Tax Assets: Inventory $ 1,148 $ 1,506 Accrued compensation 3,739 1,832 Bad debt allowance 187 164 Net operating loss 4,035 3,065 Contribution carryover 221 — Interest limitation 9,395 3,493 Research and development credit 281 — Equity-based compensation 1,555 229 Lease liability 5,689 6,585 Other 766 231 Total deferred tax assets 27,016 17,105 Deferred Tax Liabilities: Property and equipment (8,489) (6,536) Intangible assets (76,671) (81,860) Prepaid expenses (100) (131) Right-of-use asset (4,677) (5,406) Interest rate hedge (489) — Other (234) (148) Total deferred tax liabilities (90,660) (94,081) Net deferred tax liabilities $ (63,644) $ (76,976) A valuation allowance is recorded when it is more likely than not that some portion of the deferred tax assets will not be realized. As of each reporting date, the Company’s management considers all evidence, both positive and negative, that could impact management’s view with regards to future realization of deferred tax assets. As of December 31, 2022, no valuation for deferred tax assets was recorded as management believes it is more likely than not that all the deferred tax assets will be realized. At December 31, 2022, the Company has a net operating loss (“NOL”) carryforward for federal tax purposes of approximately $14.1 million and $25.9 million for state tax purposes. Additionally, the Company has a research and development (“R&D”) tax credit for federal purposes of $0.3 million. The following table summarizes the NOL and R&D tax credit carryforwards by jurisdiction: (In thousands) Expiration Period December 31, 2022 Federal NOL None $ 14,147 State NOL 2031‑2042 14,598 State NOL None 11,327 Federal R&D 2042 281 The Internal Revenue Code limits the use of net operating losses, Unrecognized tax benefits represent the aggregate tax effect of differences between the tax return positions and the amounts otherwise recognized in the Company’s consolidated financial statements and are reflected in accrued expenses and other long-term liabilities in the Company’s Consolidated Balance Sheets. The Company accounts for uncertain tax positions by recognizing the financial statement effects of a tax provision only when based upon the technical merits, it is “more-likely-than-not” that the tax position will be sustained upon examination. The following table summarizes the Company's unrecognized tax benefits: (In thousands) Balance at December 25, 2021 $ 355 Gross increases related to prior period tax position 48 Gross increases related to current period tax position — Gross decreases related to prior period tax position (88) Balance at December 31, 2022 $ 315 Included in the balance of unrecognized tax benefits at December 31, 2022, are potential benefits of $0.3 million that if recognized would affect the effective tax rate on income from continuing operations. The Company recognizes interest and penalties with respect to unrecognized tax benefits as a component of income tax (expense) benefit. The amount of accrued interest and penalties related to unrecognized tax benefits for the fiscal years ended December 31, 2022 and December 25, 2021 was $0.2 million and $0.1 million, respectively. None of the Company’s unrecognized tax benefits were recognized by the end of 2022, as a result of settlement with the taxing authorities. The Company is generally subject to potential federal and state examinations for the tax years on and after December 31, 2014 for federal purposes and December 31, 2015 for state purposes. |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2022 | |
Related Party Transactions | |
Related Party Transactions | Note 19. 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 (“Morning Fresh”), a related party entity owned and controlled by a board member of the Company. 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 December 31, 2022, the facility has a lease liability balance of $6.8 million which is primarily recognized as long-term debt in our Consolidated Balance Sheets. As of December 31, 2022, the land lease has a liability balance of $0.5 million which is primarily recognized as long-term operating lease liabilities in our Consolidated Balance Sheets. The facility lease and land lease contained payments of approximately $0.6 million, $0.5 million and $0.5 million for the fiscal years ended December 31, 2022, December 25, 2021 and December 26, 2020, respectively. In addition, $0.2 million, $0.2 million and $0.2 million was paid for the fiscal years ended December 31, 2022, December 25, 2021 and December 26, 2020, respectively, for a proportionate share of utilities, taxes and insurance. Morning Fresh regularly purchases finished goods inventory from the Company for sale to its customers. Additionally, Morning Fresh regularly supplies milk used in the Company’s manufacturing process. Sales to and purchases from Morning Fresh were as follows: Fiscal Year Ended (In thousands) December 31, 2022 December 25, 2021 December 26, 2020 Sales $ 528 $ 471 $ 439 Purchases $ 9,041 $ 5,443 $ 4,945 Amounts outstanding in respect to Morning Fresh transactions were as follows: (In thousands) December 31, 2022 December 25, 2021 Receivables $ 29 $ 26 Payables $ 870 $ 354 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 years’ 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 December 31, 2022, the Company has future commitments to purchase approximately $39.9 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 landowner’s 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. As of December 31, 2022, the estimated annual minimum purchase commitments with Morning Fresh are as follows: Fiscal Year Ending (In thousands) 2023 $ 8,375 2024 8,375 2025 8,375 2026 8,375 2027 8,375 Thereafter — Total $ 41,875 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 stockholders’ 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 (“Advent”) is a private equity firm which has funds invested in our common stock. Although no individual fund owns a controlling interest in us, together the funds represent our current majority owners. Advent 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. For the fiscal year ended December 26, 2020, the Company paid to the Limited Partnership $35 thousand for the repurchase of Class A units and IUs. There were no repurchases of Class A units or IUs in the fiscal year ended December 25, 2021. At the time of the Company’s IPO, holders of Class A units and IUs received shares of common stock and restricted common stock of Sovos Brands, Inc. in respect of their Class A units or IUs. See Note 16. Equity-Based Compensation for additional information. The Company pays legal expenses on behalf of the Limited Partnership and carries a balance within each of accounts receivables and other long-term assets that reflects the amount due from the Limited Partnership. As of December 31, 2022 and December 25, 2021, the receivable balance was $0.1 million and $0.4 million, respectively. |
Earnings (Loss) Per Share
Earnings (Loss) Per Share | 12 Months Ended |
Dec. 31, 2022 | |
Earnings (Loss) Per Share | |
Earnings (Loss) Per Share | Note 20. Earnings (Loss) Per Share Basic earnings (loss) per share (“EPS”) is calculated by dividing net income (loss) for the period by the weighted-average number of common shares outstanding for the period without consideration of potential common shares. Diluted EPS is calculated using the weighted average number of common shares outstanding including the dilutive effect of equity awards as determined under the treasury stock method. In periods when the Company has a net loss, equity awards are excluded from the calculation of diluted EPS as their inclusion would have an anti-dilutive effect. The following table presents the computation of EPS: Fiscal Year Ended (In thousands, except share and per share amounts) December 31, 2022 December 25, 2021 December 26, 2020 Net income (loss) $ (53,451) $ 1,919 $ 10,825 Weighted average basic common shares outstanding 100,917,978 80,616,326 74,058,569 Effect of dilutive securities: Restricted stock units — — 1,862,496 Performance stock units — — — Total — — 1,862,496 Weighted average and potential dilutive common shares outstanding 100,917,978 80,616,326 75,921,065 Earnings (loss) per share Basic $ (0.53) $ 0.02 $ 0.15 Diluted $ (0.53) $ 0.02 $ 0.14 The following table presents the common stock shares equivalent excluded from the calculation of diluted EPS: Fiscal Year Ended December 31, 2022 December 25, 2021 December 26, 2020 Restricted stock units 49,309 927,222 — Performance stock units — — — Total anti-dilutive shares 49,309 927,222 — |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2022 | |
Subsequent Events | |
Subsequent Events | Note 21. Subsequent Events The Company Equity-Based Compensation In February 2023, the compensation committee of the Company’s board of directors (“compensation committee”) modified a portion of the existing equity-based compensation awards (restricted stock) dated September 22, 2021, among the Company, the Limited Partnership and the holders of the restricted stock. As a result of these modifications, a portion of the shares that would have vested based upon either a 3.0 4.0 Foreign Currency Hedge In February 2023, the Company entered into a foreign currency hedge with a total notional amount of $191.4 million, to offset the earnings impact of foreign currency exchange rates through the end of fiscal 2023. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2022 | |
Summary of Significant Accounting Policies | |
Reclassification | Reclassification Equity-Based Compensation |
Use of Estimates | Use of Estimates as it relates to variable consideration, acquisition accounting fair value allocations, the recoverability of goodwill, other intangible assets, property and equipment, deferred tax assets, inventory valuation, equity-based compensation, and the determination of the useful life of customer relationship and finite-lived trademark intangible assets. Management bases its estimates on historical experience, current conditions and various other assumptions that it believes to be reasonable under the circumstances. These estimates form the basis for making judgments about the carrying values of assets and liabilities and are not readily apparent from other sources. Actual results may differ from these estimates. |
Cash and Cash Equivalents | Cash and Cash Equivalents |
Accounts Receivable, Net and Credit Losses | Accounts Receivable, Net and Credit Losses The allowance for doubtful accounts was approximately $0.8 million and $0.7 million as of December 31, 2022 and December 25, 2021, respectively. Charges related to credit loss on accounts receivables were approximately $6.0 thousand, $0.2 million and $0.2 million for the fiscal years ended December 31, 2022, December 25, 2021 and December 26, 2020, respectively. In addition, in December 2021, the Company entered into an agreement with one of its suppliers, in which the remaining $5.0 million of the original $10.0 million 2016 capital advance balance, scheduled to be repaid by December 31, 2023, was forgiven and treated as if it were repaid in full. Upon execution of the December 2021 agreement, the Company recorded a credit loss of $5.0 million within operating expenses in the Consolidated Statements of Operations and the balance previously reported within other long-term assets in the Consolidated Balance Sheets was eliminated. |
Deferred Offering Costs | Deferred Offering Costs— Upon the closing of its initial public offering (“IPO”) in September 2021, the Company had incurred $7.6 million of capitalized deferred offering costs consisting of legal, accounting, consulting, listing and filing fees, which were netted against the IPO proceeds. There were no capitalized deferred offering costs as of December 31, 2022 and December 25, 2021. |
Inventories | Inventories |
Property and Equipment | Property and Equipment Furniture and Fixtures 1-7 years Leasehold Improvements Lesser of useful life or remaining lease term Machinery and Equipment 7-12 years Computer Equipment 3-5 years Software 3 years Capital Leases Based on lease terms Repairs and maintenance costs are expensed as incurred. Major improvements that extend the life or increase the capacity of property owned are capitalized. Major improvements to leased buildings are capitalized as leasehold improvements. |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets |
Goodwill | Goodwill Birch Benders Goodwill |
Intangible Assets | Intangible Assets Customer Relationships 10-20 years Tradename 20-25 years Intangible assets with definite useful lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. If impairment indicators are present, the Company performs a recoverability test, and if it is determined the carrying amount of the asset is not recoverable and its carrying amount exceeds its fair value, then an impairment loss is recognized. There were no impairments of definite lived intangible assets in 2022, 2021 or 2020. See Note 8. Intangible Assets, Net The Rao’s Indefinite-lived intangible assets are tested for impairment by either performing a qualitative evaluation or a quantitative test. The qualitative assessment evaluates factors including macro-economic conditions, industry and company-specific factors, and historical company performance in assessing fair value. If it is determined that it is more likely than not that the fair value of the asset is less than the carrying value, a quantitative test is performed. Otherwise, no further testing is required. If it is determined that it is more likely than not that the fair value of the asset is less than the carrying value, impairment is evaluated by comparing the fair value of the asset with its carrying value, and a loss is recognized for the difference if the fair value exceeds the carrying value. When estimating the fair value, the Company uses certain assumptions, such as forecasted growth rates and cost of capital. These assumptions are consistent with our internal projections and operating plans. Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions. For example, future changes in the judgments, assumptions and estimates that are used in our tradename impairment testing could result in significantly different estimates of the fair values. In addition, changes to, or a failure to achieve business plans or deterioration of macroeconomic conditions could result in reduced cash flows or higher discount rates, leading to a lower valuation that would trigger an impairment of the tradename. There were no impairments of indefinite lived intangible assets in 2022, 2021 or 2020. See Note 8. Intangible Assets, Net |
Leasing Arrangements | Leasing Arrangements Leases 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 Company’s 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 Company’s 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 11. Leases |
Debt Issuance Costs | Debt Issuance Costs During 2021, the Company wrote off debt issuance costs of approximately $15.4 million in conjunction with the repayment of the outstanding 2018 Term Loan, Incremental Term Loan, and Initial Second Lien Facility, and partial prepayment of the Initial First Lien Term Loan Facility. During 2022 and 2020, there were no debt issuance costs written off. See Note 10. Long-Term Debt |
Comprehensive Income | Comprehensive Income |
Hedging and Derivative Financial Instruments | Hedging and Derivative Financial Instruments — The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging Derivative instruments are recorded at fair value in the Consolidated Balance Sheets and are classified based on the contractual maturity of the instrument or the timing of the underlying cash flows. The fair value of derivative instruments is reflected in prepaid expenses and other current assets, other long-term assets or accrued expenses. On the Consolidated Statements of Cash Flows, cash flows associated with derivative instruments are classified according to the nature of the underlying hedged item. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship, whether the Company has elected to apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge that are exposed to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the earnings effect of the hedged forecasted transactions in a cash flow hedge. Changes in fair value of the cash flow hedges are recognized in the Consolidated Statements of Comprehensive Income in OCI. The Company may enter into derivative contracts that are intended to economically hedge certain of its risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. Derivative instruments that have not been designated in an effective hedging relationship are considered economic hedges, and their change in fair value is recognized in the Consolidated Statements of Operations in selling, general and administrative expense. In accordance with the FASB’s fair value measurement guidance, the Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio. See Note 14. Hedging and Derivative Financial Instruments |
Dividends | Dividends— Stockholders’ Equity |
Revenue Recognition | Revenue Recognition entrées The Company accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers The Company assesses the goods promised in its customers’ purchase orders and identifies a performance obligation for each promise to transfer a good (or bundle of goods) that is distinct. To identify the performance obligations, the Company considers all the goods promised, whether explicitly stated or implied based on customary business practices. Sales to customers generally do not include more than one performance obligation. When a contract does contain more than one performance obligation, the contract’s transaction price is allocated to each performance obligation based on its relative standalone selling price. The standalone selling price for each distinct good is generally determined by list price. Revenue is reported net of applicable discounts and allowances. Trade promotions are recorded as a reduction to net sales with a corresponding reduction to accounts receivable at the time of revenue recognition for the underlying sale. The recognition of trade promotions requires management to make estimates regarding the volume of incentive that will be redeemed and their total cost. Customers may deduct from future payments for defective or non-conforming products. As a result, a related refund liability is estimated and recorded as a reduction in sales. This return estimate is reviewed and updated each period and is based on historical sales and return experience. The Company has identified certain incremental costs to obtain a contract, primarily sales and broker commissions. The Company continues to expense these costs as incurred because the amortization period for the costs would be one year or less. The Company does not incur significant fulfillment costs requiring capitalization. The Company has elected the following practical expedients in accordance with ASC 606. ● Significant financing component – The Company has elected to not adjust the promised amount of consideration for the effects of significant financing components as the Company expects, at contract inception, that the period between the transfer of a promised good to a customer and when the customer pays for that good will be one year or less. ● Measurement of transaction price – The Company has elected to exclude from the measurement of transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the Company from a customer for sales taxes. ● Shipping and handling costs – The Company includes shipping and handling costs associated with outbound freight within cost of sales. These costs are accounted for as fulfillment costs as they are incurred. |
Advertising and Marketing | Advertising and Marketing |
Research and Development | Research and Development |
Equity-Based Compensation | Equity-Based Compensation The Company determined the fair value of the Incentive Units as of the grant date and recognizes the compensation expense on a straight-line basis over the requisite service period, which is generally the vesting period of the Incentive Units. Certain Incentive Units have market and performance vesting conditions depending upon a change-in-control and achievement of certain metrics. The related compensation expense is recognized when the probability of the event is likely and performance criteria are met. In connection with the IPO, the Limited Partnership 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. In connection with the IPO, a change in vesting of the original performance-based IUs, and accordingly the related distributed restricted stock, was considered to be a modification to the grants and required the shares to be revalued using a Monte Carlo simulation model. Equity-based compensation expense is recognized for these awards on a straight-line basis over the service period, regardless of the eventual number of shares that are earned based upon the performance condition. Subsequent to the IPO, The fair value of the modified performance-based restricted stock awards was calculated using a Monte Carlo simulation option pricing model. Equity-Based Compensation Subsequent to the IPO, employees and certain nonemployees of the Company have received, and may in the future receive, equity-based compensation in the form of restricted stock units with service-based vesting conditions, using the fair market value of the Company’s common stock to measure fair value and in the form of restricted stock units with performance-based vesting conditions using a Monte Carlo simulation model to determine the grant-date fair value. Equity-based compensation expense is recognized on a straight-line basis over the requisite service period of the award based on their grant-date fair value. The Company recognizes forfeitures as they occur. |
Income Taxes | Income Taxes Certain judgments, estimates, and assumptions could affect the carrying value of deferred tax assets and valuation allowances, if any, and deferred tax liabilities in the Company’s consolidated financial statements. We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740, Income Taxes |
Concentrations of Credit Risk | Concentrations of Credit Risk— Credit risk for the Company was concentrated in three customers who each comprised more than 10% of the Company’s total sales for the fiscal years ended December 31, 2022, December 25, 2021 and December 26, 2020. Fiscal Year Ended December 31, 2022 December 25, 2021 December 26, 2020 Costco Wholesale Corporation 17% 18% 16% Walmart Inc. 13% 13% 13% United Natural Foods, Inc. 10% 11% N/A KeHE Distributors N/A N/A 11% N/A – Not applicable as the customer was not significant during these fiscal years. At December 31, 2022 and December 25, 2021, the following percentages of the Company’s accounts receivable, net were related to these significant customers for the periods in which the customers were significant: Fiscal Year Ended December 31, 2022 December 25, 2021 Costco Wholesale Corporation 32% 14% Walmart Inc. 15% 15% United Natural Foods, Inc. N/A N/A ____________ N/A – Not applicable as the customer was not significant during these fiscal years. No other customers individually had greater than 10% of total gross sales during these periods. The Company believes that there is no significant or unusual credit exposure at this time. |
Concentrations of Vendor Risk | Concentrations of Vendor Risk |
New Accounting Pronouncements and Policies | New Accounting Pronouncements and Policies Recently Issued Accounting Pronouncements Not Yet Adopted In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments-Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures fiscal years. The amendments of ASU 2022-02 require that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases. The Company expects the impact of this amendment to be administrative and does not anticipate any material impact to the consolidated financial statements. No other new accounting pronouncement issued or effective during the fiscal year had or is expected to have a material impact on the Company’s consolidated financial statements. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Summary of Significant Accounting Policies | |
Schedule of estimated useful lives of property and equipment | Furniture and Fixtures 1-7 years Leasehold Improvements Lesser of useful life or remaining lease term Machinery and Equipment 7-12 years Computer Equipment 3-5 years Software 3 years Capital Leases Based on lease terms |
Schedule of estimated useful lives of finite lived intangible assets | Customer Relationships 10-20 years Tradename 20-25 years |
Schedule of concentration of risk | Fiscal Year Ended December 31, 2022 December 25, 2021 December 26, 2020 Costco Wholesale Corporation 17% 18% 16% Walmart Inc. 13% 13% 13% United Natural Foods, Inc. 10% 11% N/A KeHE Distributors N/A N/A 11% N/A – Not applicable as the customer was not significant during these fiscal years. Fiscal Year Ended December 31, 2022 December 25, 2021 Costco Wholesale Corporation 32% 14% Walmart Inc. 15% 15% United Natural Foods, Inc. N/A N/A ____________ N/A – Not applicable as the customer was not significant during these fiscal years. |
Loss on Asset Sale (Tables)
Loss on Asset Sale (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Loss on Asset Sale | |
Schedule of pre-tax loss on the sale of assets | For the fiscal year ended December 31, 2022, the Company recognized a pre-tax loss on the sale of Birch Benders (In thousands) Cash received $ 40,000 Assets sold: Inventory (5,424) Intangible assets, net (85,867) Total assets sold (91,291) Loss on asset sale $ (51,291) |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Revenue Recognition | |
Schedule of revenue disaggregated | Fiscal Year Ended (In thousands) December 31, 2022 December 25, 2021 December 26, 2020 Rao’s $ 580,088 $ 419,966 $ 313,618 Noosa 176,166 163,476 153,492 Michael Angelo’s 80,925 79,414 83,896 Birch Benders 41,192 56,330 9,061 Total net sales $ 878,371 $ 719,186 $ 560,067 |
Inventories, Net (Tables)
Inventories, Net (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Inventories, Net | |
Schedule of inventories | (In thousands) December 31, 2022 December 25, 2021 Finished goods $ 76,404 $ 38,715 Raw materials and packaging supplies 16,198 12,900 Total inventories, net $ 92,602 $ 51,615 |
Property and Equipment, Net (Ta
Property and Equipment, Net (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Property and Equipment, Net | |
Schedule of property and equipment | (In thousands) December 31, 2022 December 25, 2021 Machinery & equipment $ 63,077 $ 45,329 Leasehold improvements 40,288 39,296 Construction in progress 6,384 12,074 Furniture & fixtures 1,605 2,119 Other 1,415 1,649 Gross property and equipment 112,769 100,467 Less: Accumulated depreciation and amortization 48,452 37,796 Property and equipment, net $ 64,317 $ 62,671 |
Goodwill (Tables)
Goodwill (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Goodwill. | |
Schedule of Goodwill | (In thousands) Goodwill Balance as of December 26, 2020 $ 437,290 Purchase accounting adjustments 161 Balance as of December 25, 2021 $ 437,451 Impairment (42,052) Balance as of December 31, 2022 $ 395,399 |
Intangible Assets, Net (Tables)
Intangible Assets, Net (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Intangible Assets, Net | |
Schedule of intangible assets net | December 31, 2022 Gross carrying Accumulated Sale of Net carrying (In thousands) amount amortization intangible assets amount Intangible assets - definite lives Customer relationships $ 213,000 $ 89,201 $ 5,082 $ 118,717 Tradename 192,347 31,732 80,785 79,830 405,347 120,933 85,867 198,547 Intangible assets - indefinite lives Tradename 153,000 — — 153,000 Total intangible assets $ 558,347 $ 120,933 $ 85,867 $ 351,547 December 25, 2021 Gross carrying Accumulated Net carrying (In thousands) amount amortization amount Intangible assets - definite lives Customer relationships $ 213,000 $ 71,330 $ 141,670 Tradename 192,347 22,362 169,985 405,347 93,692 311,655 Intangible assets - indefinite lives Tradename 153,000 — 153,000 Total intangible assets $ 558,347 $ 93,692 $ 464,655 |
Schedule of amortization expenses intangible assets net | (In thousands) Amortization 2023 $ 22,425 2024 22,425 2025 22,425 2026 22,425 2027 17,782 Thereafter 91,065 Total $ 198,547 |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Accrued Expenses | |
Schedule of Accrued Expenses | (In thousands) December 31, 2022 December 25, 2021 Accrued trade $ 32,337 $ 23,122 Accrued general expense 17,911 15,327 Accrued compensation and benefits 17,328 10,478 Accrued marketing 1,995 2,830 Total accrued expenses $ 69,571 $ 51,757 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Long-Term Debt | |
Schedule of Long-term debt | December 31, 2022 Unamortized debt issuance (In thousands) Principal costs Total debt, net Initial First Lien Term Loan Facility $ 480,800 $ (5,374) $ 475,426 Finance lease liabilities 7,017 — 7,017 Total debt $ 487,817 $ (5,374) 482,443 Less: current portion of finance lease liabilities 99 Total long-term debt $ 482,344 December 25, 2021 Unamortized debt issuance (In thousands) Principal costs Total debt, net Senior debt $ 480,800 $ (6,377) $ 474,423 Finance lease liabilities 7,095 — 7,095 Total debt $ 487,895 $ (6,377) 481,518 Less: current portion of finance lease liabilities 98 Long-term debt $ 481,420 |
Schedule of future minimum principal payments | Fiscal Year Ending (In thousands) 2023 $ — 2024 — 2025 — 2026 — 2027 — Thereafter 480,800 Total $ 480,800 |
Leases (Tables)
Leases (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Leases | |
Schedule of components of lease expenses | Fiscal Year Ended (In thousands) Statement of Operations Caption December 31, 2022 December 25, 2021 Operating lease cost: Lease cost Cost of sales and Selling, general and administrative $ 3,313 $ 3,266 Variable lease cost (1) Cost of sales and Selling, general and administrative 1,418 1,384 Total operating lease cost 4,731 4,650 Short term lease cost Cost of sales and Selling, general and administrative 240 222 Finance lease cost: Amortization of right-of-use assets Cost of sales and Selling, general and administrative 261 261 Interest on lease liabilities Interest expense, net 530 532 Total finance lease cost 791 793 Total lease cost $ 5,762 $ 5,665 (1) Variable lease cost primarily consists of common area maintenance, utilities, taxes, and insurance. |
Schedule of assets and liabilities related to both operating and finance leases | (In thousands) Balance Sheet Caption December 31, 2022 December 25, 2021 Assets Operating lease right-of-use assets Operating lease right-of-use assets $ 13,332 $ 15,672 Finance lease right-of-use assets Property and equipment, net 6,038 6,299 Total lease assets $ 19,370 $ 21,971 Liabilities Current: Operating lease liabilities Current portion of long-term operating lease liabilities $ 3,308 $ 3,216 Finance lease liabilities Current portion of long-term debt 99 98 Long-term: Operating lease liabilities Long-term operating lease liabilities 14,063 17,302 Finance lease liabilities Long-term debt, net of debt issuance costs 6,918 6,997 Total lease liabilities $ 24,388 $ 27,613 |
Schedule of weighted-average remaining lease term and weighted-average discount rate for operating and finance leases | December 31, 2022 December 25, 2021 Weighted-average remaining lease term (in years): Operating leases 6.4 7.1 Finance leases 34.2 34.8 Weighted-average discount rate Operating leases 4.9 % 4.9 % Finance leases 7.8 % 7.8 % |
Schedule of Future minimum lease payments of operating leases | Future maturities of lease liabilities as of December 31, 2022 are as follows: (In thousands) Operating Leases Finance Leases Fiscal year ending: 2023 $ 4,062 $ 609 2024 3,493 557 2025 2,982 549 2026 3,005 520 2027 3,064 525 Thereafter 3,856 18,445 Total lease payments 20,462 21,205 Less: Interest (3,091) (14,188) Present value of lease liabilities $ 17,371 $ 7,017 |
Schedule of Future minimum lease payments of finance leases | (In thousands) Operating Leases Finance Leases Fiscal year ending: 2023 $ 4,062 $ 609 2024 3,493 557 2025 2,982 549 2026 3,005 520 2027 3,064 525 Thereafter 3,856 18,445 Total lease payments 20,462 21,205 Less: Interest (3,091) (14,188) Present value of lease liabilities $ 17,371 $ 7,017 |
Schedule of supplemental cash flow and other information related to leases | Fiscal Year Ended (In thousands) December 31, 2022 December 25, 2021 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 4,045 $ 3,893 Operating cash flows from finance leases 530 532 Financing cash flows from finance leases 78 $ 66 Right-of-use assets obtained in exchange for new lease liabilities Finance leases — — Operating leases 78 1,638 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Commitments and Contingencies. | |
Schedule of estimated annual minimum purchase commitments with suppliers | Fiscal Year Ending (In thousands) 2023 $ 3,500 2024 3,500 2025 2,375 2026 — 2027 — Thereafter — Total $ 9,375 |
Fair Value of Financial Instr_2
Fair Value of Financial Instruments (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Fair Value of Financial Instruments | |
Schedule of assets and liabilities measured at fair value on a recurring basis | The table below presents the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2022, aggregated by the level in the fair value hierarchy within which those measurements fall. Fair Value Measurements Using (In thousands) Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Balance at December 31, 2022 Assets Derivatives in cash flow hedging relationships $ — $ 3,628 $ — $ 3,628 Total assets $ — $ 3,628 $ — $ 3,628 Liabilities Derivatives not designated as hedging instruments $ — $ 33 $ — $ 33 Total liabilities $ — $ 33 $ — $ 33 |
Hedging and Derivative Financ_2
Hedging and Derivative Financial Instruments (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Hedging and Derivative Financial Instruments | |
Schedule of fair values derivative instruments | The following table presents the fair values of the Company’s derivative instruments: December 31, 2022 December 25, 2021 (In thousands) Location Derivative Assets Derivative Liabilities Derivative Assets Derivative Liabilities Derivatives not designated as hedging instruments under Subtopic 815-20 Foreign currency contracts (1) Accrued expenses $ — $ 33 $ — $ — Total derivatives not designated as hedging instruments $ — $ 33 $ — $ — Derivatives designated as hedging instruments under Subtopic 815-20 Interest rate caps - short term Prepaid expenses and other current assets $ 1,997 $ — $ — $ — Interest rate caps - long term Other long-term assets 1,631 — — — Total derivatives designated as hedging instruments $ 3,628 $ — $ — $ — Total derivatives $ 3,628 $ 33 $ — $ — (1) Derivative instruments within this category are subject to master netting arrangements and are presented on a net basis in the Consolidated Balance Sheets in accordance with ASC 210, Balance Sheet, Subtopic 210-20. See tables below showing the effects of offsetting derivative assets and liabilities. |
Schedule of pre-tax effect of cash flow hedge accounting on accumulated OCI | The following table presents the pre-tax effect of cash flow hedge accounting on accumulated OCI for the periods presented: (In thousands) Amount of Gain or (Loss) Recognized in OCI Fiscal Year Ended Derivatives in Subtopic 815-20 Hedging Relationships December 31, 2022 December 25, 2021 December 26, 2020 Derivatives in cash flow hedging relationships Interest rate caps $ 2,150 $ — $ — (In thousands) Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income Fiscal Year Ended Location of Gain or (Loss) Reclassified from Accumulated OCI into Income December 31, 2022 December 25, 2021 December 26, 2020 Derivatives in cash flow hedging relationships Interest expense, net $ 112 $ — $ — |
Schedule of derivative financial instruments on Statements of Operations | The following table presents the effect of the Company’s derivative financial instruments on the Consolidated Statements of Operations for the periods presented: Gain (Loss) Recognized Fiscal Year Ended December 31, December 25, December 26, (In thousands) Statement of Operations Location 2022 2021 2020 Total amounts of expense presented in the Statements of Operations in which the derivatives not designated as hedging are recorded Selling, general and administrative $ 163,025 $ 135,060 $ 124,612 The effects of derivatives not designated as hedging instruments under Subtopic 815-20: Foreign currency contracts Selling, general and administrative (33) — — Total amounts of expense presented in the Statements of Operations in which the derivatives designated as hedging are recorded Interest expense, net 27,851 30,885 19,895 The effects of derivatives designated as hedging instruments under Subtopic 815-20: Interest rate caps Interest expense, net 112 — — |
Schedule of net amounts of derivative assets | Offsetting of Derivative Assets As of December 31, 2022 (In thousands) Gross Amounts Not Offset in the Balance Sheet Gross Amounts of Recognized Assets Gross Amounts Offset in the Balance Sheet Net Amounts of Assets Presented in the Balance Sheet Financial Instruments Cash Collateral Posted Gross Amounts of Recognized Assets Derivatives Foreign currency contracts $ 56 $ (56) $ — $ — $ — $ — Total derivatives, subject to a master netting arrangement 56 (56) — — — — Total derivatives, not subject to a master netting arrangement 3,628 — — — 3,628 Total derivatives $ 3,684 $ (56) $ $ — $ — $ 3,628 |
Schedule of net amounts of derivative liabilities | Offsetting of Derivative Liabilities As of December 31, 2022 (In thousands) Gross Amounts Not Offset in the Balance Sheet Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Balance Sheet Net Amounts of Liabilities Presented in the Balance Sheet ' Financial Instruments Cash Collateral Posted Net Amount Derivatives Foreign currency contracts $ (89) $ 56 $ (33) $ — $ — $ (33) Total derivatives, subject to a master netting arrangement (89) 56 (33) — — (33) Total derivatives, not subject to a master netting arrangement — — — — — — Total derivatives $ (89) $ 56 $ (33) $ — $ — $ (33) |
Equity-Based Compensation (Tabl
Equity-Based Compensation (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |
Schedule of assumptions used to estimate fair value of incentive units | Fiscal Year Ended December 25, 2021 December 26, 2020 Expected term 1.5 to 3.5 yrs 1.5 to 3.5 yrs Risk-free rate of return 1.61% 1.61% Applied volatility 20% 20% |
Schedule of incentive units activity | Service Based Performance Based Weighted Average Weighted Average Incentive Grant Date Incentive Grant Date Units Fair Value Units Fair Value Outstanding at December 26, 2020 34,659 $ 245 46,000 $ 15 Granted 1,231 842 1,722 8 Forfeited (332) 407 (908) 13 Distribution of common stock with respect to IUs (1) (35,558) 264 (46,814) 14 Outstanding at December 25, 2021 — $ — — $ — Vested at December 25, 2021 — — — — (1) In connection with the IPO, the Limited Partnership 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. |
Schedule of restricted common stock activity | Service Based Performance Based Weighted Average Weighted Average Restricted Grant Date Restricted Grant Date Common Stock Fair Value Common Stock Fair Value Nonvested at December 26, 2020 — $ — — $ — Distribution of restricted common stock (1)(2) 94,646 12.00 3,319,291 3.91 Granted — — — — Vested (18,558) 12.00 (683,442) 7.86 Forfeited back to the Limited Partnership (3) (3,847) 12.00 (45,001) 2.89 Nonvested at December 25, 2021 72,241 $ 12.00 2,590,848 $ 5.25 Granted — — — — Vested (63,548) 12.00 (276,008) 13.29 Forfeited back to the Limited Partnership (3) (1,229) 12.00 (371,974) 4.98 Nonvested at December 31, 2022 7,464 12.00 1,942,866 4.15 Vested at December 31, 2022 791,012 $ 12.00 959,450 $ 9.42 (1) The service-based restricted common stock excludes 708,906 shares that vested prior to distribution. None of the performance-based restricted common stock vested prior to distribution. (2) The weighted average grant date fair value for the performance-based restricted common stock at distribution was based on the 2.0 x multiple of invested capital (“MOIC”) modification described below. A subsequent modification in November 2021 to the 4.0 x MOIC restricted common stock resulted in an increase in the weighted average grant date fair value for those shares to $15.15 per share. (3) S hares of restricted common stock that do not vest are not cancelled but instead remain outstanding and are forfeited back to the Limited Partnership. |
Schedule of equity-based compensation expense | Fiscal Year Ended (In thousands) December 31, 2022 December 25, 2021 Equity awards under the 2017 Plan (Pre-IPO) RSAs $ 1,103 $ 1,750 PSAs 6,677 6,688 Total equity-based compensation expense for the 2017 Plan 7,780 8,438 Equity awards under the 2021 Plan (Post-IPO) RSUs 7,425 982 PSUs 3,233 404 Total equity-based compensation expense for the 2021 Plan 10,658 1,386 Total equity-based compensation expense $ 18,438 $ 9,824 |
Restricted Stock Units | |
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |
Schedule of restricted stock unit activity | Weighted Average Restricted Stock Grant Date Units Fair Value Outstanding at December 26, 2020 — $ — Granted 967,158 12.00 Vested — — Forfeited (39,936) 12.00 Outstanding at December 25, 2021 927,222 12.00 Granted 946,949 14.06 Vested (75,363) 12.07 Forfeited (181,793) 12.48 Outstanding at December 31, 2022 1,617,015 $ 13.15 Vested at December 31, 2022 75,363 $ 12.07 |
Performance Based Restricted Stock Units | |
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |
Schedule of restricted stock unit activity | Performance-based Weighted Average Restricted Stock Grant Date Units Fair Value Outstanding at December 26, 2020 — $ — Granted 687,690 7.09 Vested — — Forfeited (5,728) 7.09 Outstanding at December 25, 2021 681,962 7.09 Granted 423,222 15.63 Vested — — Forfeited (130,493) 8.58 Outstanding at December 31, 2022 974,691 $ 10.60 Vested at December 31, 2022 — $ — |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Income Taxes | |
Schedule of income tax expense (benefit) | Income tax (expense) benefit consists of the following: Fiscal Year Ended (In thousands) December 31, 2022 December 25, 2021 December 26, 2020 Current: Federal $ — $ (641) $ — State (933) (791) (1,928) Total current tax (expense) (933) (1,432) (1,928) Deferred: Federal 10,229 (3,414) (805) State 3,592 1,171 (3,944) Total deferred tax (expense) benefit 13,821 (2,243) (4,749) Income tax (expense) benefit $ 12,888 $ (3,675) $ (6,677) |
Schedule of income tax expense reconciliation | Total income tax (expense) benefit in fiscal 2022, 2021 and 2020 varies from the amounts computed by applying the federal statutory income tax rate of 21% to income (loss) before income taxes primarily due to the following items: Fiscal Year Ended (In thousands) December 31, 2022 December 25, 2021 December 26, 2020 United States statutory income tax (expense) benefit $ 13,931 21.0 % $ (1,175) 21.0 % $ (3,676) 21.0 % State tax (expense) benefit, net of federal tax 966 1.5 (910) 16.3 (781) 4.5 Transaction costs — — 312 (5.6) 2,763 (15.8) Equity-based compensation (1,634) (2.5) (1,772) 31.7 (406) 2.3 Nondeductible executive compensation (912) (1.4) (625) 11.2 — — Other permanent items (597) (0.9) (180) 3.2 (113) 0.6 Remeasurement of deferred tax balances 1,150 1.7 993 (17.7) (3,388) 19.4 Unrecognized tax (expense) benefit 5 — 121 (2.2) (609) 3.5 Return to provision (412) (0.6) (236) 4.2 (81) 0.5 Deferred income tax adjustments 164 0.2 (200) 3.6 (450) 2.6 Research and development credit 281 0.4 — — — — Other, net (54) (0.1) (3) 0.1 64 (0.4) Income tax (expense) benefit $ 12,888 19.3 % $ (3,675) 65.8 % $ (6,677) 38.2 % |
Schedule of deferred tax assets and liabilities | Fiscal Year Ended (In thousands) December 31, 2022 December 25, 2021 Deferred Tax Assets: Inventory $ 1,148 $ 1,506 Accrued compensation 3,739 1,832 Bad debt allowance 187 164 Net operating loss 4,035 3,065 Contribution carryover 221 — Interest limitation 9,395 3,493 Research and development credit 281 — Equity-based compensation 1,555 229 Lease liability 5,689 6,585 Other 766 231 Total deferred tax assets 27,016 17,105 Deferred Tax Liabilities: Property and equipment (8,489) (6,536) Intangible assets (76,671) (81,860) Prepaid expenses (100) (131) Right-of-use asset (4,677) (5,406) Interest rate hedge (489) — Other (234) (148) Total deferred tax liabilities (90,660) (94,081) Net deferred tax liabilities $ (63,644) $ (76,976) |
Summary of NOL carryforwards by jurisdiction | The following table summarizes the NOL and R&D tax credit carryforwards by jurisdiction: (In thousands) Expiration Period December 31, 2022 Federal NOL None $ 14,147 State NOL 2031‑2042 14,598 State NOL None 11,327 Federal R&D 2042 281 |
Summary of unrecognized tax benefits | The following table summarizes the Company's unrecognized tax benefits: (In thousands) Balance at December 25, 2021 $ 355 Gross increases related to prior period tax position 48 Gross increases related to current period tax position — Gross decreases related to prior period tax position (88) Balance at December 31, 2022 $ 315 |
Related Party Transactions (Tab
Related Party Transactions (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Related Party Transaction [Line Items] | |
Schedule of transactions with related party | Fiscal Year Ended (In thousands) December 31, 2022 December 25, 2021 December 26, 2020 Sales $ 528 $ 471 $ 439 Purchases $ 9,041 $ 5,443 $ 4,945 (In thousands) December 31, 2022 December 25, 2021 Receivables $ 29 $ 26 Payables $ 870 $ 354 |
Schedule of estimated annual minimum purchase commitments with suppliers | Fiscal Year Ending (In thousands) 2023 $ 3,500 2024 3,500 2025 2,375 2026 — 2027 — Thereafter — Total $ 9,375 |
Morning Fresh | |
Related Party Transaction [Line Items] | |
Schedule of estimated annual minimum purchase commitments with suppliers | As of December 31, 2022, the estimated annual minimum purchase commitments with Morning Fresh are as follows: Fiscal Year Ending (In thousands) 2023 $ 8,375 2024 8,375 2025 8,375 2026 8,375 2027 8,375 Thereafter — Total $ 41,875 |
Earnings (Loss) Per Share (Tabl
Earnings (Loss) Per Share (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Earnings (Loss) Per Share | |
Schedule of Basic and diluted earnings (loss) per share | Fiscal Year Ended (In thousands, except share and per share amounts) December 31, 2022 December 25, 2021 December 26, 2020 Net income (loss) $ (53,451) $ 1,919 $ 10,825 Weighted average basic common shares outstanding 100,917,978 80,616,326 74,058,569 Effect of dilutive securities: Restricted stock units — — 1,862,496 Performance stock units — — — Total — — 1,862,496 Weighted average and potential dilutive common shares outstanding 100,917,978 80,616,326 75,921,065 Earnings (loss) per share Basic $ (0.53) $ 0.02 $ 0.15 Diluted $ (0.53) $ 0.02 $ 0.14 |
Schedule of anti-dilutive securities | Fiscal Year Ended December 31, 2022 December 25, 2021 December 26, 2020 Restricted stock units 49,309 927,222 — Performance stock units — — — Total anti-dilutive shares 49,309 927,222 — |
Company Overview (Details)
Company Overview (Details) | Dec. 31, 2022 subsidiary |
Sovos Brands Intermediate, Inc. | |
Consolidation, Wholly Owned Subsidiary, Parent Ownership Interest [Line Items] | |
Number of subsidiaries | 4 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details) - USD ($) | 1 Months Ended | 12 Months Ended | ||||
Dec. 25, 2021 | Jun. 30, 2021 | Dec. 31, 2022 | Dec. 25, 2021 | Dec. 26, 2020 | Sep. 30, 2021 | |
Summary of Significant Accounting Policies | ||||||
Allowance for doubtful accounts | $ 700,000 | $ 800,000 | $ 700,000 | |||
Charges related to credit loss on accounts receivables | 6,000 | 200,000 | $ 200,000 | |||
Supplier advance | 10,000,000 | 10,000,000 | ||||
Credit loss within operating expenses | 5,000,000 | |||||
Deferred offering costs | $ 0 | 0 | 0 | $ 7,600,000 | ||
Impairments of long-lived assets | 0 | 0 | 0 | |||
Write off of debt issuance costs | 0 | 0 | ||||
Advertising and marketing expenses | 40,700,000 | 38,900,000 | 38,900,000 | |||
Research and development expense | $ 6,700,000 | 5,100,000 | $ 3,600,000 | |||
2018 Term loan and Incremental Term loan | ||||||
Summary of Significant Accounting Policies | ||||||
Write off of debt issuance costs | $ 9,400,000 | $ 15,400,000 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Property and Equipment (Details) | 12 Months Ended |
Dec. 31, 2022 | |
Furniture & fixtures | Minimum | |
Property, Plant and Equipment [Line Items] | |
Useful lives of property and equipment | 1 year |
Furniture & fixtures | Maximum | |
Property, Plant and Equipment [Line Items] | |
Useful lives of property and equipment | 7 years |
Machinery & equipment | Minimum | |
Property, Plant and Equipment [Line Items] | |
Useful lives of property and equipment | 7 years |
Machinery & equipment | Maximum | |
Property, Plant and Equipment [Line Items] | |
Useful lives of property and equipment | 12 years |
Computer Equipment | Minimum | |
Property, Plant and Equipment [Line Items] | |
Useful lives of property and equipment | 3 years |
Computer Equipment | Maximum | |
Property, Plant and Equipment [Line Items] | |
Useful lives of property and equipment | 5 years |
Software | |
Property, Plant and Equipment [Line Items] | |
Intangible asset useful life | 3 years |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Intangible Assets (Details) - USD ($) | 3 Months Ended | 12 Months Ended | 24 Months Ended | |||
Jun. 26, 2022 | Jun. 25, 2022 | Dec. 31, 2022 | Dec. 25, 2021 | Dec. 26, 2020 | Dec. 25, 2021 | |
Impairment charges | ||||||
Goodwill impairment | $ 42,100,000 | $ 42,100,000 | $ 42,052,000 | $ 0 | $ 0 | $ 0 |
Impairment of intangible assets, finite lived | 0 | 0 | 0 | |||
Impairment of intangible assets, indefinite lived | $ 0 | $ 0 | $ 0 | |||
Customer Relationships | Minimum | ||||||
Intangible Assets | ||||||
Intangible asset useful life | 10 years | |||||
Customer Relationships | Maximum | ||||||
Intangible Assets | ||||||
Intangible asset useful life | 20 years | |||||
Tradename | Minimum | ||||||
Intangible Assets | ||||||
Intangible asset useful life | 20 years | |||||
Tradename | Maximum | ||||||
Intangible Assets | ||||||
Intangible asset useful life | 25 years |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Concentrations of risk percentage (Details) | 12 Months Ended | ||
Dec. 31, 2022 customer item | Dec. 25, 2021 item customer | Dec. 26, 2020 customer | |
Accounts receivable | Customer concentration risk | Costco Wholesale Corporation | |||
Concentration Risk [Line Items] | |||
Concentration risk percentage | 32% | 14% | |
Accounts receivable | Customer concentration risk | Walmart Inc. | |||
Concentration Risk [Line Items] | |||
Concentration risk percentage | 15% | 15% | |
Total gross sales | Customer concentration risk | |||
Concentration Risk [Line Items] | |||
Number of customers | customer | 3 | 3 | 3 |
Total gross sales | Customer concentration risk | Costco Wholesale Corporation | |||
Concentration Risk [Line Items] | |||
Concentration risk percentage | 17% | 18% | 16% |
Total gross sales | Customer concentration risk | Walmart Inc. | |||
Concentration Risk [Line Items] | |||
Concentration risk percentage | 13% | 13% | 13% |
Total gross sales | Customer concentration risk | United Natural Foods, Inc. | |||
Concentration Risk [Line Items] | |||
Concentration risk percentage | 10% | 11% | |
Total gross sales | Customer concentration risk | KeHE Distributors | |||
Concentration Risk [Line Items] | |||
Concentration risk percentage | 11% | ||
Inventory purchases | Supplier concentration risk | One vendor | |||
Concentration Risk [Line Items] | |||
Number of vendors | item | 1 | 1 | |
Concentration risk percentage | 53% | 53% |
Loss on Asset Sale (Details)
Loss on Asset Sale (Details) $ in Thousands | 12 Months Ended |
Dec. 31, 2022 USD ($) | |
Loss on Asset Sale | |
Proceeds from sale of business | $ 40,000 |
Loss on asset sale | (51,291) |
Disposed by sale | Birch Benders brand | |
Loss on Asset Sale | |
Proceeds from sale of business | 40,000 |
Inventory | (5,424) |
Intangible assets, net | (85,867) |
Total assets sold | (91,291) |
Loss on asset sale | $ (51,291) |
Revenue Recognition (Details)
Revenue Recognition (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 25, 2021 | Dec. 26, 2020 | |
Revenue Recognition | |||
Total net sales | $ 878,371 | $ 719,186 | $ 560,067 |
Rao's | |||
Revenue Recognition | |||
Total net sales | 580,088 | 419,966 | 313,618 |
Noosa | |||
Revenue Recognition | |||
Total net sales | 176,166 | 163,476 | 153,492 |
Michael Angelo's | |||
Revenue Recognition | |||
Total net sales | 80,925 | 79,414 | 83,896 |
Birch Benders | |||
Revenue Recognition | |||
Total net sales | $ 41,192 | $ 56,330 | $ 9,061 |
Inventories, Net (Details)
Inventories, Net (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 25, 2021 |
Inventories, Net | ||
Finished goods | $ 76,404 | $ 38,715 |
Raw materials and packaging supplies | 16,198 | 12,900 |
Total inventories, net | $ 92,602 | $ 51,615 |
Property and Equipment, Net (De
Property and Equipment, Net (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 25, 2021 |
Property and Equipment, Net | ||
Gross property and equipment | $ 112,769 | $ 100,467 |
Less: Accumulated depreciation and amortization | 48,452 | 37,796 |
Property and equipment, net | 64,317 | 62,671 |
Machinery & equipment | ||
Property and Equipment, Net | ||
Gross property and equipment | 63,077 | 45,329 |
Leasehold improvements | ||
Property and Equipment, Net | ||
Gross property and equipment | 40,288 | 39,296 |
Construction in progress | ||
Property and Equipment, Net | ||
Gross property and equipment | 6,384 | 12,074 |
Furniture & fixtures | ||
Property and Equipment, Net | ||
Gross property and equipment | 1,605 | 2,119 |
Other | ||
Property and Equipment, Net | ||
Gross property and equipment | $ 1,415 | $ 1,649 |
Property and Equipment, Net - N
Property and Equipment, Net - Narrative (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 25, 2021 | Dec. 26, 2020 | |
Property and Equipment, Net | |||
Depreciation and amortization expense | $ 11.6 | $ 10.6 | $ 10.6 |
Cost of goods sales, Depreciation and amortization | $ 10.1 | $ 8.9 | $ 9.1 |
Goodwill (Details)
Goodwill (Details) $ in Thousands | 3 Months Ended | 12 Months Ended | 24 Months Ended | |||
Jun. 26, 2022 USD ($) | Jun. 25, 2022 USD ($) | Dec. 31, 2022 USD ($) item | Dec. 25, 2021 USD ($) item | Dec. 26, 2020 USD ($) | Dec. 25, 2021 USD ($) | |
Goodwill | ||||||
Beginning balance | $ 437,451 | $ 437,290 | ||||
Purchase accounting adjustments | 161 | |||||
Impairment | $ (42,100) | $ (42,100) | (42,052) | 0 | $ 0 | $ 0 |
Ending balance | $ 395,399 | $ 437,451 | $ 437,290 | $ 437,451 | ||
Number of reporting units | item | 3 | 3 |
Intangible Assets, Net (Details
Intangible Assets, Net (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 25, 2021 | Dec. 26, 2020 |
Intangible assets - definite lives | |||
Gross carrying amount | $ 405,347 | $ 405,347 | |
Accumulated amortization | 120,933 | 93,692 | |
Sale of intangible assets | 85,867 | 0 | $ 0 |
Total | 198,547 | 311,655 | |
Intangible assets - indefinite lives | |||
Gross Carrying Amount | 558,347 | 558,347 | |
Accumulated amortization | 120,933 | 93,692 | |
Sale of intangible assets | 85,867 | ||
Net carrying amount | 351,547 | 464,655 | |
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 | 89,201 | 71,330 | |
Sale of intangible assets | 5,082 | ||
Total | 118,717 | 141,670 | |
Intangible assets - indefinite lives | |||
Accumulated amortization | 89,201 | 71,330 | |
Tradename | |||
Intangible assets - definite lives | |||
Gross carrying amount | 192,347 | 192,347 | |
Accumulated amortization | 31,732 | 22,362 | |
Sale of intangible assets | 80,785 | ||
Total | 79,830 | 169,985 | |
Intangible assets - indefinite lives | |||
Accumulated amortization | $ 31,732 | $ 22,362 |
Intangible Assets, Net - Narrat
Intangible Assets, Net - Narrative (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 25, 2021 | Dec. 26, 2020 | |
Finite-Lived Intangible Assets [Line Items] | |||
Amortization expense | $ 27,200,000 | $ 27,200,000 | $ 23,200,000 |
Sales of definite lived intangible assets | 85,867,000 | 0 | 0 |
Finite lived intangible assets net | 198,547,000 | 311,655,000 | |
Impairment of intangible assets, finite lived | 0 | 0 | 0 |
Impairment of intangible assets, indefinite lived | 0 | 0 | $ 0 |
Customer relationships | |||
Finite-Lived Intangible Assets [Line Items] | |||
Sales of definite lived intangible assets | 5,082,000 | ||
Finite lived intangible assets net | 118,717,000 | 141,670,000 | |
Tradename | |||
Finite-Lived Intangible Assets [Line Items] | |||
Sales of definite lived intangible assets | 80,785,000 | ||
Finite lived intangible assets net | 79,830,000 | $ 169,985,000 | |
Birch Benders | Customer relationships | |||
Finite-Lived Intangible Assets [Line Items] | |||
Sales of definite lived intangible assets | 5,100,000 | ||
Birch Benders | Tradename | |||
Finite-Lived Intangible Assets [Line Items] | |||
Sales of definite lived intangible assets | $ 80,800,000 |
Intangible Assets, Net - Amorti
Intangible Assets, Net - Amortization expense (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 25, 2021 |
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract] | ||
2023 | $ 22,425 | |
2024 | 22,425 | |
2025 | 22,425 | |
2026 | 22,425 | |
2027 | 17,782 | |
Thereafter | 91,065 | |
Total | $ 198,547 | $ 311,655 |
Accrued Expenses (Details)
Accrued Expenses (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 25, 2021 |
Accrued Expenses | ||
Accrued trade | $ 32,337 | $ 23,122 |
Accrued general expense | 17,911 | 15,327 |
Accrued compensation and benefits | 17,328 | 10,478 |
Accrued marketing | 1,995 | 2,830 |
Total accrued expenses | $ 69,571 | $ 51,757 |
Long-Term Debt - Schedule of Lo
Long-Term Debt - Schedule of Long-term debt (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 25, 2021 |
Long-term debt | ||
Principal | $ 487,817 | $ 487,895 |
Unamortized debt issuance costs | (5,374) | (6,377) |
Total debt, net | 480,800 | |
Finance lease liabilities | $ 7,017 | $ 7,095 |
Finance Lease, Liability, Statement of Financial Position [Extensible Enumeration] | Total debt | Total debt |
Total debt | $ 482,443 | $ 481,518 |
Less: current portion of finance lease liabilities | 99 | 98 |
Total long-term debt | 482,344 | 481,420 |
Initial First Lien Term Loan Facility | ||
Long-term debt | ||
Principal | 480,800 | 480,800 |
Unamortized debt issuance costs | (5,374) | (6,377) |
Total debt, net | $ 475,426 | $ 474,423 |
Long-Term Debt (Details)
Long-Term Debt (Details) - USD ($) $ in Thousands | 1 Months Ended | 12 Months Ended | |||||||
Jun. 08, 2021 | Oct. 31, 2021 | Sep. 30, 2021 | Jun. 30, 2021 | Dec. 31, 2022 | Dec. 25, 2021 | Dec. 26, 2020 | Oct. 31, 2020 | Nov. 30, 2018 | |
Long-term debt | |||||||||
Dividends | $ 400,000 | ||||||||
Loss on the extinguishment | $ (15,382) | ||||||||
Write off of debt issuance costs | $ 0 | $ 0 | |||||||
Principal | 487,817 | 487,895 | |||||||
Payment of debt issuance costs | 3,046 | 2,263 | |||||||
Amortization of debt issuance costs | 1,331 | 1,883 | 1,775 | ||||||
Interest expense net | |||||||||
Long-term debt | |||||||||
Amortization of debt issuance costs | 1,200 | 1,900 | $ 1,800 | ||||||
Initial First Lien Term Loan Facility | |||||||||
Long-term debt | |||||||||
Prepayment of debt | $ 39,500 | $ 59,700 | |||||||
Accrued interest | $ 900 | 900 | |||||||
Loss on the extinguishment | (1,400) | ||||||||
Principal | 480,800 | ||||||||
Payment of debt issuance costs | $ 6,800 | ||||||||
Threshold limit of Percentage of minimum interest rate | 0% | ||||||||
Revolving Facility | |||||||||
Long-term debt | |||||||||
Loan amount | $ 45,000 | ||||||||
Write off of debt issuance costs | $ 300 | ||||||||
Payment of debt issuance costs | 1,100 | ||||||||
Amortization of debt issuance costs | 200 | ||||||||
Available credit | 125,000 | 125,000 | |||||||
Outstanding debt | $ 0 | ||||||||
Initial Second Lien Facility | |||||||||
Long-term debt | |||||||||
Prepayment of debt | 200,000 | ||||||||
Accrued interest | 2,900 | ||||||||
Write off of debt issuance costs | $ 4,300 | ||||||||
Debt discounts on issuance | 4,000 | ||||||||
Payment of debt issuance costs | $ 500 | ||||||||
Percentage of reduction in interest upon consummation of an IPO | 0.25% | ||||||||
Threshold limit of Percentage of minimum interest rate | 0.75% | ||||||||
Initial Second Lien Facility | LIBOR | |||||||||
Long-term debt | |||||||||
Interest rate (as a percent) | 8% | ||||||||
Threshold limit of Percentage of minimum interest rate | 0.75% | ||||||||
First Lien Revolving Line of Credit | |||||||||
Long-term debt | |||||||||
Threshold limit of Percentage of minimum interest rate | 0% | ||||||||
Outstanding debt | $ 0 | 0 | |||||||
2018 Term loan | |||||||||
Long-term debt | |||||||||
Loan amount | $ 280,000 | ||||||||
Incremental Term Loan | |||||||||
Long-term debt | |||||||||
Loan amount | $ 100,000 | ||||||||
2018 Term loan and Incremental Term loan | |||||||||
Long-term debt | |||||||||
Write off of debt issuance costs | $ 9,400 | $ 15,400 | |||||||
2018 Term loan and Incremental Term loan | Credit Suisse AG, Cayman Islands Branch | |||||||||
Long-term debt | |||||||||
Repayment of outstanding loan | 373,200 | ||||||||
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% | ||||||||
First Lien Credit Agreement | Initial First Lien Term Loan Facility | |||||||||
Long-term debt | |||||||||
Loan amount | 580,000 | ||||||||
First Lien Credit Agreement | Revolving Facility | |||||||||
Long-term debt | |||||||||
Available credit | 125,000 | ||||||||
First Lien Credit Agreement | Letter of credit facility | |||||||||
Long-term debt | |||||||||
Available credit | 45,000 | ||||||||
Second Lien Credit Agreement | Initial Second Lien Facility | |||||||||
Long-term debt | |||||||||
Loan amount | $ 200,000 | ||||||||
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) | 7.91% | 4.50% | |||||||
Initial First Lien Term Loan Facility and Revolving Facility | LIBOR | Minimum | |||||||||
Long-term debt | |||||||||
Interest rate (as a percent) | 4% | ||||||||
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 | |||||||||
Principal | $ 480,800 | $ 480,800 | |||||||
Debt discounts on issuance | $ 1,500 |
Long-Term Debt - Schedule of fu
Long-Term Debt - Schedule of future minimum principal payments (Details) $ in Thousands | Dec. 31, 2022 USD ($) |
Maturities of Long-term Debt [Abstract] | |
Thereafter | $ 480,800 |
Total debt, net | $ 480,800 |
Leases - Components of lease ex
Leases - Components of lease expenses (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 25, 2021 | |
Operating lease cost: | ||
Total operating lease cost | $ 4,731 | $ 4,650 |
Total finance lease cost | 791 | 793 |
Total lease cost | 5,762 | 5,665 |
Cost of sales and Selling, general and administrative | ||
Operating lease cost: | ||
Lease cost | 3,313 | 3,266 |
Variable lease cost | 1,418 | 1,384 |
Short term lease cost | 240 | 222 |
Amortization of right-of-use assets | 261 | 261 |
Interest expense net | ||
Operating lease cost: | ||
Interest on lease liabilities | $ 530 | $ 532 |
Minimum | ||
Leases | ||
Lease term | 2 years | |
Maximum | ||
Leases | ||
Lease term | 10 years | |
Equipment | ||
Leases | ||
Lease term | 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 | |
Manufacturing facilities and office space | Maximum | ||
Leases | ||
Lease term | 30 years |
Leases - Assets and Liabilities
Leases - Assets and Liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 25, 2021 |
Leases | ||
Operating lease right-of-use assets | $ 13,332 | $ 15,672 |
Finance lease right-of-use assets | $ 6,038 | $ 6,299 |
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration] | Property, Plant and Equipment, Net | Property, Plant and Equipment, Net |
Total lease assets | $ 19,370 | $ 21,971 |
Current portion of long-term lease liabilities | 3,308 | 3,216 |
Current portion of long-term finance lease liabilities | 99 | 98 |
Operating lease liability, long-term | 14,063 | 17,302 |
Finance lease liabilities, long-term | $ 6,918 | $ 6,997 |
Finance Lease, Liability, Noncurrent, Statement of Financial Position [Extensible Enumeration] | Long-term Debt and Lease Obligation | Long-term Debt and Lease Obligation |
Total lease liabilities | $ 24,388 | $ 27,613 |
Leases - Other information (Det
Leases - Other information (Details) | Dec. 31, 2022 | Dec. 25, 2021 |
Leases | ||
Weighted-average remaining lease term (years) - operating leases | 6 years 4 months 24 days | 7 years 1 month 6 days |
Weighted-average remaining lease term (years) - Finance leases | 34 years 2 months 12 days | 34 years 9 months 18 days |
Weighted-average discount rate - operating leases | 4.90% | 4.90% |
Weighted-average discount rate - Finance leases | 7.80% | 7.80% |
Leases - Future maturities of l
Leases - Future maturities of lease liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 25, 2021 |
Operating Leases | ||
2023 | $ 4,062 | |
2024 | 3,493 | |
2025 | 2,982 | |
2026 | 3,005 | |
2027 | 3,064 | |
Thereafter | 3,856 | |
Total lease payments | 20,462 | |
Less: Interest | (3,091) | |
Present value of lease liabilities | 17,371 | |
Finance Leases | ||
2023 | 609 | |
2024 | 557 | |
2025 | 549 | |
2026 | 520 | |
2027 | 525 | |
Thereafter | 18,445 | |
Total lease payments | 21,205 | |
Less: Interest | (14,188) | |
Present value of lease liabilities | $ 7,017 | $ 7,095 |
Leases - Supplemental cash flow
Leases - Supplemental cash flow and other information (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 25, 2021 | |
Leases | ||
Operating cash flows from operating leases | $ 4,045 | $ 3,893 |
Operating cash flows from finance leases | 530 | 532 |
Financing cash flows from finance leases | 78 | 66 |
Right-of-use assets obtained in exchange for new operating lease liabilities | $ 78 | $ 1,638 |
Commitments and Contingencies -
Commitments and Contingencies - Narrative (Details) $ in Millions | 12 Months Ended | |
Dec. 31, 2022 USD ($) item | Dec. 25, 2021 USD ($) | |
Commitments and Contingencies. | ||
Purchase commitments to third-party manufacturers | $ | $ 3 | $ 2.4 |
Number of suppliers | item | 1 |
Commitments and Contingencies_2
Commitments and Contingencies - Estimated annual minimum purchase commitments with suppliers (Details) $ in Thousands | Dec. 31, 2022 USD ($) |
Purchase commitments with suppliers | |
2023 | $ 3,500 |
2024 | 3,500 |
2025 | 2,375 |
Total | $ 9,375 |
Fair Value of Financial Instr_3
Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | 24 Months Ended | |||
Jun. 26, 2022 | Jun. 25, 2022 | Dec. 31, 2022 | Dec. 25, 2021 | Dec. 26, 2020 | Dec. 25, 2021 | |
Fair Value of Financial Instruments | ||||||
Asset transfer from level 1 to level 2 | $ 0 | $ 0 | $ 0 | |||
Asset transfer from level 2 to level 1 | 0 | 0 | 0 | |||
Liabilities transfer from level 1 to level 2 | 0 | 0 | 0 | |||
Liabilities transfer from level 2 to level 1 | 0 | 0 | 0 | |||
Assets transfer in or out of level 3 | 0 | 0 | ||||
Liability transfer in or out of level 3 | 0 | 0 | ||||
Impairment of goodwill | $ 42,100 | $ 42,100 | 42,052 | 0 | $ 0 | 0 |
Derivative assets | 3,628 | 0 | 0 | |||
Derivative liabilities | $ 33 | $ 0 | $ 0 |
Fair Value of Financial Instr_4
Fair Value of Financial Instruments - Assets and liabilities measured at fair value on recurring basis (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 25, 2021 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total Assets | $ 3,628 | $ 0 |
Total Liabilities | 33 | $ 0 |
Designated as Hedging Instrument | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total Assets | 3,628 | |
Not Designated as Hedging Instrument | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total Liabilities | 33 | |
Recurring basis | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total Assets | 3,628 | |
Total Liabilities | 33 | |
Recurring basis | Not Designated as Hedging Instrument | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total Liabilities | $ 33 | |
Derivative Liability, Statement of Financial Position [Extensible Enumeration] | Other Liabilities, Noncurrent | |
Recurring basis | Cash flow hedging | Designated as Hedging Instrument | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total Assets | $ 3,628 | |
Recurring basis | Significant Other Observable Inputs (Level 2) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total Assets | 3,628 | |
Total Liabilities | 33 | |
Recurring basis | Significant Other Observable Inputs (Level 2) | Not Designated as Hedging Instrument | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total Liabilities | 33 | |
Recurring basis | Significant Other Observable Inputs (Level 2) | Cash flow hedging | Designated as Hedging Instrument | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total Assets | $ 3,628 |
Hedging and Derivative Financ_3
Hedging and Derivative Financial Instruments - Fair value of derivative instruments (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 25, 2021 |
Assets | ||
Total Assets | $ 3,628 | $ 0 |
Liabilities | ||
Total Liabilities | 33 | $ 0 |
Not Designated as Hedging Instrument | ||
Liabilities | ||
Total Liabilities | 33 | |
Designated as Hedging Instrument | ||
Assets | ||
Total Assets | $ 3,628 | |
Foreign exchange contract | Not Designated as Hedging Instrument | ||
Assets | ||
Derivative Asset, Statement of Financial Position [Extensible Enumeration] | Accrued Liabilities, Current | Accrued Liabilities, Current |
Liabilities | ||
Total Liabilities | $ 33 | |
Interest rate cap | Prepaid expenses and other current assets | Designated as Hedging Instrument | ||
Assets | ||
Total Assets | 1,997 | |
Interest rate cap | Other long-term assets | Designated as Hedging Instrument | ||
Assets | ||
Total Assets | $ 1,631 |
Hedging and Derivative Financ_4
Hedging and Derivative Financial Instruments - Pre-tax effect of cash flow hedge accounting on accumulated OCI (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 25, 2021 | Dec. 26, 2020 | |
Derivative [Line Items] | |||
Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income | $ 1,400 | ||
Designated as Hedging Instrument | Cash flow hedging | |||
Derivative [Line Items] | |||
Total notional value | 240,000 | ||
Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income | $ 112 | ||
Derivative Instrument, Gain (Loss) Reclassified from AOCI into Income, Effective Portion, Statement of Income or Comprehensive Income [Extensible Enumeration] | Interest Income (Expense), Net | Interest Income (Expense), Net | Interest Income (Expense), Net |
Designated as Hedging Instrument | LIBOR | Cash flow hedging | |||
Derivative [Line Items] | |||
Interest rate cap | 4% | ||
Foreign exchange contract | Not Designated as Hedging Instrument | |||
Derivative [Line Items] | |||
Total notional value | $ 145,700 | $ 0 | |
Interest rate cap | Designated as Hedging Instrument | Cash flow hedging | |||
Derivative [Line Items] | |||
Amount of Gain or (Loss) Recognized in OCI | $ 2,150 |
Hedging and Derivative Financ_5
Hedging and Derivative Financial Instruments - Effect of derivative financial instruments on Statements of Operations (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 25, 2021 | Dec. 26, 2020 | |
Not Designated as Hedging Instrument | |||
Derivative [Line Items] | |||
Gain (Loss) Recognized | $ 163,025 | $ 135,060 | $ 124,612 |
Designated as Hedging Instrument | Cash flow hedging | |||
Derivative [Line Items] | |||
Gain (Loss) Recognized | 27,851 | $ 30,885 | $ 19,895 |
Foreign exchange contract | Not Designated as Hedging Instrument | |||
Derivative [Line Items] | |||
Gain (Loss) Recognized | (33) | ||
Interest rate cap | Designated as Hedging Instrument | Cash flow hedging | |||
Derivative [Line Items] | |||
Gain (Loss) Recognized | $ 112 |
Hedging and Derivative Financ_6
Hedging and Derivative Financial Instruments - Offsetting of Derivative Assets (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 25, 2021 |
Derivatives, subject to a master netting arrangement | ||
Gross Amounts of Recognized Assets | $ 3,684 | |
Gross Amounts Offset in the Balance Sheet | (56) | |
Gross Amounts Not Offset in the Balance Sheet, Gross Amounts of Recognized Assets | 3,628 | |
Derivatives, not subject to a master netting arrangement | ||
Gross Amounts Not Offset in the Balance Sheet, Gross Amounts of Recognized Assets | 3,628 | |
Assets | ||
Gross Amounts of Recognized Assets | 3,684 | |
Gross Amounts Offset in the Balance Sheet | (56) | |
Total Assets | 3,628 | $ 0 |
Gross Amounts Not Offset in the Balance Sheet, Gross Amounts of Recognized Assets | 3,628 | |
Foreign currency contract derivatives subject to master netting | ||
Derivatives, subject to a master netting arrangement | ||
Gross Amounts of Recognized Assets | 56 | |
Gross Amounts Offset in the Balance Sheet | (56) | |
Assets | ||
Gross Amounts of Recognized Assets | 56 | |
Gross Amounts Offset in the Balance Sheet | (56) | |
Derivatives not Subject to master netting | ||
Derivatives, subject to a master netting arrangement | ||
Gross Amounts Not Offset in the Balance Sheet, Gross Amounts of Recognized Assets | 3,628 | |
Derivatives, not subject to a master netting arrangement | ||
Gross Amounts Offset in the Balance Sheet | 3,628 | |
Gross Amounts Not Offset in the Balance Sheet, Gross Amounts of Recognized Assets | 3,628 | |
Assets | ||
Gross Amounts Not Offset in the Balance Sheet, Gross Amounts of Recognized Assets | $ 3,628 |
Hedging and Derivative Financ_7
Hedging and Derivative Financial Instruments - Offsetting of Derivative Liabilities (Details) $ in Thousands | Dec. 31, 2022 USD ($) |
Derivative Liability, Subject to Master Netting Arrangement, after Offset and Deduction [Abstract] | |
Gross Amounts of Recognized Liabilities | $ (89) |
Gross Amounts Offset in the Balance Sheet | 56 |
Net Amounts of Liabilities Presented in the Balance Sheet | (33) |
Net Amount | (33) |
Liabilities | |
Gross Amounts of Recognized Liabilities | (89) |
Gross Amounts Offset in the Balance Sheet | 56 |
Net Amounts of Liabilities Presented in the Balance Sheet | (33) |
Net Amount | (33) |
Foreign currency contract derivatives subject to master netting | |
Derivative Liability, Subject to Master Netting Arrangement, after Offset and Deduction [Abstract] | |
Gross Amounts of Recognized Liabilities | (89) |
Gross Amounts Offset in the Balance Sheet | 56 |
Net Amounts of Liabilities Presented in the Balance Sheet | (33) |
Net Amount | (33) |
Liabilities | |
Gross Amounts of Recognized Liabilities | (89) |
Gross Amounts Offset in the Balance Sheet | 56 |
Net Amounts of Liabilities Presented in the Balance Sheet | (33) |
Net Amount | $ (33) |
Stockholders' Equity (Details)
Stockholders' Equity (Details) $ / shares in Units, $ in Thousands | 12 Months Ended | ||||||||||
Mar. 08, 2023 shares | Aug. 22, 2022 shares | Aug. 10, 2022 $ / shares shares | Oct. 05, 2021 USD ($) shares | Sep. 27, 2021 USD ($) $ / shares shares | Sep. 08, 2021 $ / shares shares | Jun. 08, 2021 USD ($) | Dec. 25, 2021 USD ($) $ / shares shares | Dec. 31, 2022 $ / shares shares | Sep. 23, 2021 $ / shares shares | Sep. 07, 2021 $ / shares shares | |
Subsidiary, Sale of Stock [Line Items] | |||||||||||
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 | 500,000,000 | 750,000 | ||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.001 | $ 0.001 | $ 0.001 | $ 0.001 | $ 0.01 | ||||||
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 | 100,892,547 | 100,967,910 | ||||||||
Common stock, outstanding (in shares) | 74,058,447 | 100,892,547 | 100,967,910 | ||||||||
Common stock issued (in shares) | 1,275,000 | ||||||||||
Offering price (in dollar per share) | $ / shares | $ 14 | ||||||||||
IPO | |||||||||||
Subsidiary, Sale of Stock [Line Items] | |||||||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.001 | ||||||||||
Common stock issued (in shares) | 23,334,000 | ||||||||||
Offering price (in dollar per share) | $ / shares | $ 12 | ||||||||||
Net proceeds from IPO | $ | $ 263,200 | ||||||||||
Underwriting discounts and commissions | $ | $ 16,800 | ||||||||||
Over-Allotment Option | |||||||||||
Subsidiary, Sale of Stock [Line Items] | |||||||||||
Common stock, outstanding (in shares) | 101,214,297 | ||||||||||
Common stock issued (in shares) | 36,609,100 | 8,500,000 | 3,500,100 | ||||||||
Net proceeds from IPO | $ | $ 39,500 | ||||||||||
Underwriting discounts and commissions | $ | $ 2,500 | ||||||||||
Ownership percentage held by new investors | 36.20% |
Equity-Based Compensation (Deta
Equity-Based Compensation (Details) $ / shares in Units, $ in Thousands | 12 Months Ended | ||||||
Feb. 23, 2023 | Nov. 03, 2021 tranche shares | Sep. 21, 2021 USD ($) installment tranche item shares | Dec. 31, 2022 USD ($) installment $ / shares shares | Dec. 25, 2021 USD ($) $ / shares shares | Dec. 26, 2020 | Nov. 04, 2021 $ / shares | |
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||||||
Allocated share based payments | $ | $ 18,438 | $ 9,824 | |||||
Applied volatility | 33.30% | ||||||
2021 Equity Incentive Plan | |||||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||||||
Allocated share based payments | $ | $ 10,658 | $ 1,386 | |||||
Shares reserved for future issuance | 9,739,244 | 7,072,175 | |||||
Time Based Restricted Common Stock | Tranche One | Subsequent Event | |||||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||||||
Vesting percentage | 50% | ||||||
Time Based Restricted Common Stock | Tranche Two | Subsequent Event | |||||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||||||
Vesting percentage | 50% | ||||||
Performance Based Incentive Units | |||||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||||||
Vested | 0 | 1,942,866 | |||||
Shares reserved for future issuance | 79,422 | ||||||
Increase in fair value | $ / shares | $ 15.15 | ||||||
Performance Based Incentive Units | Tranche One | |||||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||||||
Vested | 169,698 | ||||||
Performance Based Incentive Units | Tranche Two | |||||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||||||
Vested | 1,776,168 | ||||||
Service Based Incentive Units | |||||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||||||
Vested | 708,906 | ||||||
Performance Based Restricted Stock Units | |||||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||||||
Allocated share based payments | $ | $ 3,233 | $ 404 | |||||
Performance Based Restricted Stock Units | Employees | |||||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||||||
Grants in period | 343,800 | 687,690 | |||||
Performance Based Restricted Stock Units | Minimum | |||||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||||||
Percentage of shares may be earned | 0% | ||||||
Performance Based Restricted Stock Units | Maximum | |||||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||||||
Percentage of shares may be earned | 200% | ||||||
Performance Based Restricted Stock Units | 2021 Equity Incentive Plan | |||||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||||||
Grants in period | 423,222 | 687,690 | |||||
Unvested shares | 974,691 | 681,962 | |||||
Forfeited | (130,493) | (5,728) | |||||
Increase in fair value | $ / shares | $ 10.60 | $ 7.09 | |||||
Performance Based Restricted Common Stock | |||||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||||||
Modified grant date fair value | $ | $ 6,100 | ||||||
Multiplying factor for invested capital | tranche | 4 | 2 | |||||
Volume of weighted average share price, number of day | item | 30 | ||||||
Maximum percentage owned by ultimate parent | 25% | ||||||
Term of post IPO | 30 months | ||||||
Vested | 683,442 | 276,008 | 683,442 | ||||
Unvested shares | 1,942,866 | 2,590,848 | |||||
Fair value of Incentive Units | $ | $ 13,000 | ||||||
Forfeited | (371,974) | (45,001) | |||||
Increase in fair value | $ / shares | $ 4.15 | $ 5.25 | |||||
Service Based Restricted Common Stock | |||||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||||||
Vested | 63,548 | 18,558 | |||||
Unvested shares | 7,464 | 72,241 | |||||
Forfeited | (1,229) | (3,847) | |||||
Increase in fair value | $ / shares | $ 12 | $ 12 | |||||
Service Based Restricted Common Stock | Tranche One | |||||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||||||
Vested | 7,464 | ||||||
Restricted Stock Units | |||||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||||||
Allocated share based payments | $ | $ 7,425 | $ 982 | |||||
Restricted Stock Units | Vesting in Two Installments | Employees | |||||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||||||
Number of equal installmetns | installment | 2 | ||||||
Restricted Stock Units | Vesting in Three Installments | Employees | |||||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||||||
Grants in period | 314,306 | ||||||
Number of equal installmetns | installment | 3 | ||||||
Restricted Stock Units | Vesting In First Anniversary | Director | |||||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||||||
Grants in period | 27,810 | ||||||
Restricted Stock Units | 2021 Equity Incentive Plan | |||||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||||||
Vested | 75,363 | ||||||
Grants in period | 946,949 | 967,158 | |||||
Unvested shares | 1,617,015 | 927,222 | |||||
Forfeited | (181,793) | (39,936) | |||||
Increase in fair value | $ / shares | $ 13.15 | $ 12 | |||||
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% | ||||||
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 | ||||||
Incentive Units | |||||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||||||
Applied volatility | 20% | 20% | |||||
Time based RSUs | Employees and Independent Directors | |||||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||||||
Grants in period | 946,949 | ||||||
Time based RSUs | Vesting in Two Installments | Employees | |||||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||||||
Grants in period | 604,833 |
Equity-Based Compensation - Sch
Equity-Based Compensation - Schedule of assumptions used to estimate fair value of incentive units (Details) | 12 Months Ended | |
Dec. 25, 2021 | Dec. 26, 2020 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Applied volatility | 33.30% | |
Incentive Units | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Risk-free rate of return | 1.61% | 1.61% |
Applied volatility | 20% | 20% |
Incentive Units | Minimum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected term (in years) | 1 year 6 months | 1 year 6 months |
Incentive Units | Maximum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected term (in years) | 3 years 6 months | 3 years 6 months |
Equity-Based Compensation - S_2
Equity-Based Compensation - Schedule of Incentive Units Activity (Details) - $ / shares | 12 Months Ended | |||
Nov. 03, 2021 | Sep. 21, 2021 | Dec. 31, 2022 | Dec. 25, 2021 | |
Incentive Units | Service Based | ||||
Incentive Units. | ||||
Beginning balance | 34,659 | |||
Granted | 1,231 | |||
Forfeited | (332) | |||
Distribution on common stock with respect to IUs | (35,558) | |||
Weighted Average Grant date Fair Value | ||||
Beginning balance | $ 245 | |||
Granted | 842 | |||
Forfeited | 407 | |||
Distribution of common stock with respect to IUs | $ 264 | |||
Incentive Units | Performance Based | ||||
Incentive Units. | ||||
Beginning balance | 46,000 | |||
Granted | 1,722 | |||
Forfeited | (908) | |||
Distribution on common stock with respect to IUs | (46,814) | |||
Weighted Average Grant date Fair Value | ||||
Beginning balance | $ 15 | |||
Granted | 8 | |||
Forfeited | 13 | |||
Distribution of common stock with respect to IUs | $ 14 | |||
Service Based Restricted Common Stock | ||||
Incentive Units. | ||||
Beginning balance | 72,241 | |||
Forfeited | (1,229) | (3,847) | ||
Distribution on common stock with respect to IUs | 94,646 | |||
Vested | (63,548) | (18,558) | ||
Ending balance | 7,464 | 72,241 | ||
Vested balance | 791,012 | |||
Weighted Average Grant date Fair Value | ||||
Beginning balance | $ 12 | |||
Distribution of restricted common stock | $ 12 | |||
Vested | 12 | 12 | ||
Forfeited | 12 | 12 | ||
Ending balance | 12 | $ 12 | ||
Vested balance | $ 12 | |||
Performance Based Restricted Common Stock | ||||
Incentive Units. | ||||
Beginning balance | 2,590,848 | |||
Forfeited | (371,974) | (45,001) | ||
Distribution of restricted common stock | 3,319,291 | |||
Vested | (683,442) | (276,008) | (683,442) | |
Ending balance | 1,942,866 | 2,590,848 | ||
Vested balance | 959,450 | |||
Weighted Average Grant date Fair Value | ||||
Beginning balance | $ 5.25 | |||
Distribution of restricted common stock | $ 3.91 | |||
Vested | 13.29 | 7.86 | ||
Forfeited | 4.98 | 2.89 | ||
Ending balance | 4.15 | $ 5.25 | ||
Vested balance | $ 9.42 | |||
Service Based Incentive Units | ||||
Incentive Units. | ||||
Vested | (708,906) | |||
Performance Based Incentive Units | ||||
Incentive Units. | ||||
Vested | 0 | (1,942,866) |
Equity-Based Compensation - S_3
Equity-Based Compensation - Schedule of restricted stock and performance-based restricted stock units (Details) - 2021 Equity Incentive Plan - $ / shares | 12 Months Ended | |
Dec. 31, 2022 | Dec. 25, 2021 | |
Restricted Stock Units | ||
Incentive Units. | ||
Beginning balance | 927,222 | |
Granted | 946,949 | 967,158 |
Forfeited | (181,793) | (39,936) |
Ending balance | 1,617,015 | 927,222 |
Vested | (75,363) | |
Weighted Average Grant date Fair Value | ||
Beginning balance | $ 12 | |
Granted | 14.06 | $ 12 |
Forfeited | 12.48 | 12 |
Ending balance | 13.15 | $ 12 |
Vested | $ 12.07 | |
Performance Based Restricted Stock Units | ||
Incentive Units. | ||
Beginning balance | 681,962 | |
Granted | 423,222 | 687,690 |
Forfeited | (130,493) | (5,728) |
Ending balance | 974,691 | 681,962 |
Weighted Average Grant date Fair Value | ||
Beginning balance | $ 7.09 | |
Granted | 15.63 | $ 7.09 |
Forfeited | 8.58 | 7.09 |
Ending balance | $ 10.60 | $ 7.09 |
Equity-Based Compensation - Com
Equity-Based Compensation - Compensation (Details) - USD ($) $ in Thousands | 12 Months Ended | 36 Months Ended | |
Dec. 31, 2022 | Dec. 25, 2021 | Dec. 27, 2025 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share-based Payment Arrangement, Expense | $ 18,438 | $ 9,824 | |
Forecast | Subsequent Event | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share-based Payment Arrangement, Expense | $ 27,200 | ||
RSAs | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share-based Payment Arrangement, Expense | 1,103 | 1,750 | |
PSAs | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share-based Payment Arrangement, Expense | 6,677 | 6,688 | |
RSUs | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share-based Payment Arrangement, Expense | 7,425 | 982 | |
PSUs | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share-based Payment Arrangement, Expense | 3,233 | 404 | |
2017 Equiyt Incentive Plan (PRE IPO) | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share-based Payment Arrangement, Expense | 7,780 | 8,438 | |
2021 Equiyt Incentive Plan (POST IPO) | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share-based Payment Arrangement, Expense | $ 10,658 | $ 1,386 |
Employee Benefits (Details)
Employee Benefits (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 25, 2021 | Dec. 26, 2020 | |
Employee Benefits | |||
Contributions to the plan | $ 1.8 | $ 1.8 | $ 1.4 |
Income Taxes - Income tax expen
Income Taxes - Income tax expense benefit (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 25, 2021 | Dec. 26, 2020 | |
Current: | |||
Federal | $ (641) | ||
State | $ (933) | (791) | $ (1,928) |
Total current tax (expense) | (933) | (1,432) | (1,928) |
Deferred: | |||
Federal | 10,229 | (3,414) | (805) |
State | 3,592 | 1,171 | (3,944) |
Total deferred tax (expense) benefit | 13,821 | (2,243) | (4,749) |
Income tax (expense) benefit | $ 12,888 | $ (3,675) | $ (6,677) |
Income Taxes - Summary of incom
Income Taxes - Summary of income tax expenses reconciliation (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 25, 2021 | Dec. 26, 2020 | |
Effective income tax rate reconciliation amount | |||
United States statutory income tax (expense) benefit | $ 13,931 | $ (1,175) | $ (3,676) |
State tax (expense) benefit, net of federal tax | 966 | (910) | (781) |
Transaction costs | 312 | 2,763 | |
Equity-based compensation | (1,634) | (1,772) | (406) |
Nondeductible executive compensation | (912) | (625) | |
Nondeductible executive compensation | (597) | (180) | (113) |
Remeasurement of deferred tax balances | 1,150 | 993 | (3,388) |
Unrecognized tax (expense) benefit | 5 | 121 | (609) |
Return to provision | (412) | (236) | (81) |
Deferred income tax adjustments | 164 | (200) | (450) |
Research and development credit | 281 | ||
Other, net | (54) | (3) | 64 |
Income tax (expense) benefit | $ 12,888 | $ (3,675) | $ (6,677) |
Effective income tax rate reconciliation percent | |||
United States statutory income tax expense (benefit) (percent) | 21% | 21% | 21% |
State tax expense (benefit), net of federal tax (percent) | 1.50% | 16.30% | 4.50% |
Transaction costs (percent) | (5.60%) | (15.80%) | |
Stock-based compensation (percent) | (2.50%) | 31.70% | 2.30% |
Nondeductible executive compensation (percent) | (1.40%) | 11.20% | |
Other permanent items (percent) | (0.90%) | 3.20% | 0.60% |
Remeasurement of deferred tax balances (percent) | 1.70% | (17.70%) | 19.40% |
Unrecognized tax benefits (percent) | (2.20%) | 3.50% | |
Return to provision (percent) | (0.60%) | 4.20% | 0.50% |
Income tax payable adjustment (percent) | 0.20% | 3.60% | 2.60% |
Deferred income tax adjustments (percent) | 0.40% | ||
Other, net (percent) | (0.10%) | 0.10% | (0.40%) |
Income tax expense (benefit) (percent) | 19.30% | 65.80% | 38.20% |
Income Taxes - Deferred income
Income Taxes - Deferred income tax assets and liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 25, 2021 |
Deferred Income Tax Assets: | ||
Inventory | $ 1,148 | $ 1,506 |
Accrued compensation | 3,739 | 1,832 |
Bad debt allowance | 187 | 164 |
Net operating loss | 4,035 | 3,065 |
Contribution carryover | 221 | |
Interest limitation | 9,395 | 3,493 |
Research and Development credit | 281 | |
Equity-based compensation | 1,555 | 229 |
Lease liability | 5,689 | 6,585 |
Other | 766 | 231 |
Total deferred tax assets | 27,016 | 17,105 |
Deferred Income Tax Liabilities: | ||
Property and equipment | (8,489) | (6,536) |
Intangible assets | (76,671) | (81,860) |
Prepaid expenses | (100) | (131) |
Right-of-use asset | (4,677) | (5,406) |
Interest rate hedge | 489 | |
Other | (234) | (148) |
Tootal deferred tax liabilities | (90,660) | (94,081) |
Net deferred tax liabilities | $ (63,644) | $ (76,976) |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 25, 2021 | |
Operating Loss Carryforwards [Line Items] | ||
Valuation for deferred tax assets | $ 0 | |
Research and development ("R&D") tax credit for federal purposes | $ 300 | |
Percentage of value of capital stock | 50% | |
Unrecognized tax benefits | $ 315 | $ 355 |
Accrued interest and penalties related to unrecognized tax benefits | 200 | $ 100 |
Unrecognized tax benefits resulting from settlements with taxing authorities | 0 | |
Federal | ||
Operating Loss Carryforwards [Line Items] | ||
Net operating loss carryforward | 14,100 | |
State | ||
Operating Loss Carryforwards [Line Items] | ||
Net operating loss carryforward | $ 25,900 |
Income Taxes - Summary of NOL c
Income Taxes - Summary of NOL carryforwards by jurisdiction (Details) $ in Thousands | Dec. 31, 2022 USD ($) |
Federal | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforwards, subject to expiration dates | $ 14,147 |
Operating loss carryforwards, not subject to expiration dates | 281 |
State | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforwards, subject to expiration dates | 14,598 |
Operating loss carryforwards, not subject to expiration dates | $ 11,327 |
Income Taxes - Summary of unrec
Income Taxes - Summary of unrecognized tax benefits (Details) $ in Thousands | 12 Months Ended |
Dec. 31, 2022 USD ($) | |
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward] | |
Balance, beginning of year | $ 355 |
Gross increases related to prior period tax position | 48 |
Gross decreases related to prior period tax position | (88) |
Balance, end of year | $ 315 |
Related Party Transactions (Det
Related Party Transactions (Details) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 USD ($) item | Dec. 25, 2021 USD ($) | Dec. 26, 2020 USD ($) | |
Related Party Transaction [Line Items] | |||
Related party leases | item | 2 | ||
Finance lease liability | $ 6,918 | $ 6,997 | |
Operating lease liability, long-term | 14,063 | 17,302 | |
Morning Fresh | |||
Related Party Transaction [Line Items] | |||
Finance lease liability | 6,800 | ||
Operating lease liability, long-term | 500 | ||
Total facility lease payments | 600 | 500 | $ 500 |
Shares of utilities | $ 200 | $ 200 | $ 200 |
Related Party Transactions - Tr
Related Party Transactions - Transactions (Details) - Morning Fresh - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 25, 2021 | Dec. 26, 2020 | |
Related Party Transaction [Line Items] | |||
Sales | $ 528 | $ 471 | $ 439 |
Purchases | 9,041 | 5,443 | $ 4,945 |
Receivables | 29 | 26 | |
Payables | $ 870 | $ 354 |
Related Party Transactions - Na
Related Party Transactions - Narrative (Details) | 1 Months Ended | 12 Months Ended | |||
Feb. 26, 2021 USD ($) | Jan. 31, 2019 USD ($) shares | Dec. 31, 2022 USD ($) item | Dec. 25, 2021 USD ($) shares | Dec. 26, 2020 USD ($) | |
Related Party Transaction [Line Items] | |||||
Future commitments to purchase | $ 3,000,000 | $ 2,400,000 | |||
Payments to parent | $ 35,000 | ||||
Class A units | |||||
Related Party Transaction [Line Items] | |||||
Shares repurchased | shares | 0 | ||||
Morning Fresh | |||||
Related Party Transaction [Line Items] | |||||
Purchases | $ 9,041,000 | $ 5,443,000 | $ 4,945,000 | ||
Morning Fresh | Milk supply agreement | |||||
Related Party Transaction [Line Items] | |||||
Number of additional periods | item | 15 | ||||
Term of extension period | 2 years | ||||
Written notice required to terminate agreement | 4 years | ||||
Maximum quantity agreed to be received | 3,650,000 | ||||
Future commitments to purchase | $ 39,900,000 | ||||
Monthly additional costs | 33,000 | ||||
Early termination penalty | $ 0 | ||||
Term of Agreement | 10 years | ||||
Morning Fresh | Milk supply agreement | Maximum | |||||
Related Party Transaction [Line Items] | |||||
Early termination penalty | $ 3,000,000 | ||||
Stockholder | Class A units | |||||
Related Party Transaction [Line Items] | |||||
Issuance of notes to stockholders (in shares) | 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 | ||||
Sovos Brands Limited Partnership | |||||
Related Party Transaction [Line Items] | |||||
Receivable balance | $ 100,000 | $ 400,000 |
Related Party Transactions - Su
Related Party Transactions - Summary of estimated annual minimum purchase commitments (Details) $ in Thousands | Dec. 31, 2022 USD ($) |
Purchase commitments with suppliers | |
2023 | $ 3,500 |
2024 | 3,500 |
2025 | 2,375 |
Total | 9,375 |
Related parties | Morning Fresh | |
Purchase commitments with suppliers | |
2023 | 8,375 |
2024 | 8,375 |
2025 | 8,375 |
2026 | 8,375 |
2027 | 8,375 |
Total | $ 41,875 |
Earnings (Loss) Per Share - Bas
Earnings (Loss) Per Share - Basic and Diluted earnings (loss) per share (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 25, 2021 | Dec. 26, 2020 | |
Earnings (Loss) Per Share | |||
Net income (loss) | $ (53,451) | $ 1,919 | $ 10,825 |
Weighted average basic common shares outstanding | 100,917,978 | 80,616,326 | 74,058,569 |
Restricted stock units | 1,862,496 | ||
Total | 1,862,496 | ||
Weighted average and potential diluted common shares outstanding | 100,917,978 | 80,616,326 | 75,921,065 |
Earnings (loss) per share | |||
Basic earnings (loss) per share | $ (0.53) | $ 0.02 | $ 0.15 |
Diluted earnings (loss) per share | $ (0.53) | $ 0.02 | $ 0.14 |
Earnings (Loss) Per Share (Deta
Earnings (Loss) Per Share (Details) - shares | 12 Months Ended | |
Dec. 31, 2022 | Dec. 25, 2021 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dilutive shares | 49,309 | 927,222 |
Restricted Stock Units | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dilutive shares | 49,309 | 927,222 |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent Event $ in Millions | Feb. 23, 2023 tranche | Feb. 25, 2023 USD ($) |
Foreign Currency Hedges [Member] | ||
Subsequent Event [Line Items] | ||
Total notional value | $ | $ 191.4 | |
Time Based Restricted Common Stock | Vesting on September 23, 2024 | ||
Subsequent Event [Line Items] | ||
Vesting percentage | 50% | |
Time Based Restricted Common Stock | Vesting on September 23, 2025 | ||
Subsequent Event [Line Items] | ||
Vesting percentage | 50% | |
Modification to 2021 Equity Incentive Plan | Restricted stock | Minimum | ||
Subsequent Event [Line Items] | ||
Multiplying factor for invested capital | 3 | |
Modification to 2021 Equity Incentive Plan | Restricted stock | Maximum | ||
Subsequent Event [Line Items] | ||
Multiplying factor for invested capital | 4 | |
Modification to 2021 Equity Incentive Plan | Time Based Restricted Common Stock | Vesting on September 23, 2024 | ||
Subsequent Event [Line Items] | ||
Vesting percentage | 50% | |
Modification to 2021 Equity Incentive Plan | Time Based Restricted Common Stock | Vesting on September 23, 2025 | ||
Subsequent Event [Line Items] | ||
Vesting percentage | 50% |