As filed with the Securities and Exchange Commission on September 14, 2021

Registration No. 333-259110​

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 2
to

FORM S-1​

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

Sovos Brands, Inc.

(Exact name of registrant as specified in its charter)

168 Centennial Parkway, Suite 200
Louisville, CO 80027
(720) 316-1225

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)​

Corporation Service Company
251 Little Falls Drive
Wilmington, DE 19808
(302) 636-5400

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)​

Copies to:

Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.   ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”and “emerging growth company” in Rule 12b-2 of the Exchange Act. in Rule 12b-2 of the Exchange Act.

Large accelerated filer   ☐Accelerated filer   ☐Non-accelerated filer   ☒Smaller reporting company   ☐Emerging growth company   ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act.   ☐

​

(1)

Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(a) promulgated under the Securities Act of 1933, as amended.

​

(2)

Includes shares of common stock that may be issuable upon exercise of an option to purchase additional shares granted to the underwriters.

​

(3)

Of this amount, $10,910.00 was previously paid.

​

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to Completion, Dated September 14, 2021

PRELIMINARY PROSPECTUS

23,334,000 Shares

Sovos Brands, Inc.

Common Stock

This is an initial public offering of common stock by Sovos Brands, Inc. (the “Company”). We are offering 23,334,000 shares of our common stock.

Prior to this offering, there has been no public market for our common stock. It is currently estimated that the initial public offering price per share will be between $14.00 and $16.00. We have applied to have our common stock listed on the NASDAQ Global Market (“NASDAQ”) under the symbol “SOVO.”

We are an “emerging growth company” as defined under the federal securities laws and, as such, will be subject to reduced public company reporting requirements. See “Prospectus Summary — Implications of Being an Emerging Growth Company.” After the completion of this offering, we expect to be a “controlled company” within the meaning of the corporate governance standards of NASDAQ.

See “Risk Factors” on page 24 to read about factors you should consider before buying shares of our common stock.

Neither the Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

(1)

We refer you to “Underwriting,” beginning on page 140 of this prospectus, for additional information regarding total underwriter compensation.

​

We have agreed to reimburse underwriters for certain expenses with this offering.

To the extent that the underwriters sell more than 23,334,000 shares of common stock, the underwriters have an option to purchase up to an additional 3,500,100 shares from us at the initial public offering price less the underwriting discount.

The underwriters expect to deliver the shares against payment in New York, New York on           , 2021.

J.P. MorganGoldman Sachs & Co. LLCBofA SecuritiesCredit Suisse

BarclaysUBS Investment BankCowen Piper SandlerStifelWilliam Blair

Telsey Advisory Group Drexel HamiltonLoop Capital Markets

 

 

 

 

 

 

TABLE OF CONTENTS

You should rely only on the information contained in this prospectus or in any free-writing prospectus we may specifically authorize to be delivered or made available to you. Neither we nor the underwriters (or any of our or their respective affiliates) have authorized anyone to provide any information other than that contained in this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we have referred you. Neither we nor the underwriters (or any of our or their respective affiliates) take any responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We and the underwriters (or any of our or their respective affiliates) are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus or any free-writing prospectus is accurate only as of its date, regardless of its time of delivery or the time of any sale of shares of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.

Our fiscal year ends on the last Saturday closest to December 31 and as a result, a 53rd week is added approximately every sixth year. Fiscal 2020 and fiscal 2019 each had 52 weeks. Our fiscal quarters are comprised of 13 weeks each, ending on the 13th Saturday of each quarter, except for the 53-week fiscal years for which the fourth quarter will be comprised of 14 weeks, ending on the 14th Saturday of such fourth quarter.

 

i

 

Trademarks and Trade Names

We own or have the rights to use various trademarks, trade names, service marks and copyrights, including the following: Sovos™, Sovos Brands™, Rao’s®, Rao’s Homemade®, Rao’s Homemade Since 1896®, Rao’s Homestyle Since 1896®, Rao’s Homestyle™, Rao’s Made for Home™, noosa®, noosa finest yoghurt®, noosa mates®, Birch Benders®, Micro-Pancakery®, Magic Syrup® and Michael Angelo’s®, and various logos used in association with these terms. Some of the more important trademarks that we own or have rights to use that appear in this prospectus may be registered in the United States and other jurisdictions. Solely for convenience, any trademarks, trade names, service marks or copyrights referred to or used herein are listed without the applicable ©, ® or ™ symbol, but such references or uses are not intended to indicate, in any way, that we, or the applicable owner, will not assert, to the fullest extent under applicable law, our or their, as applicable, rights to these trademarks, trade names, service marks and copyrights. Other trademarks, trade names, service marks or copyrights of any other company appearing in this prospectus are, to our knowledge, the property of their respective owners.

Unless we indicate otherwise or the context otherwise requires, all references in this prospectus to our Rao’s brand include our Rao’s Homemade, Rao’s Homestyle and Rao’s Made for Home brands, and all references to our Rao’s products include our Rao’s Homemade pasta sauces (including tomato-based sauces, Alfredo sauces and Pesto sauces), pizza sauces and dry pastas; Rao’s Homestyle meat-based pasta sauces; and Rao’s Made for Home frozen entrées and soups.

Our subsidiary, Rao’s Specialty Foods, Inc. (“RSF” or “Rao’s Specialty Foods”), is party to a worldwide co-existence agreement with an unaffiliated third party, Rao’s Bar & Grill, Inc. (“RBG”), that governs each party’s rights to use and register trademarks consisting of or compromising Rao’s and associated logos (collectively, the “Rao’s Marks”). Pursuant to this agreement, RSF owns the right to use and register the Rao’s Marks in connection with foods, food products, beverages, sauces and related goods and services (including, without limitation, cookbooks and online and retail store services), while RBG owns the right to use and register the Rao’s Marks in connection with restaurant and bar services, including the Rao's restaurant in New York City, which is not affiliated with us. See “Business — Intellectual Property.”

Market and Industry Information

We relied, to the extent available, upon management’s review of independent industry surveys and publications and other publicly available information from a number of sources, including Information Resources, Inc. (“IRI”) and SPINS LLC (“SPINS”). The information regarding the fastest growing food company of scale in the United States is based on U.S. multi-outlet (“MULO”) retail and natural channel information from SPINS for the 52 weeks ended July 11, 2021 as compared to the 52 weeks ended December 28, 2019 and includes food companies with over $500 million in retail sales in the 52 weeks ended July 11, 2021 in the frozen, grocery, produce and refrigerated departments, and excludes beverage companies. The information regarding Michael Angelo’s dollar sales growth in the 52 weeks ended June 13, 2021 is based on information from IRI regarding U.S. food channel sales. Unless otherwise indicated, market share, retail sales, distribution and velocity information and panel data (including household penetration, repeat purchase rates, basket size and consumer demographics information) included in this prospectus are based on U.S. MULO channel information from IRI, and NPS (as defined herein) and aided awareness information included in this prospectus is based on Company-sponsored third-party studies. References to percentage growth included in this prospectus compare the relevant period to the comparable period in the prior year. Combined categories include the pasta and pizza sauce, ready-to-serve soup, dry pasta, frozen dinner, baking mix (inclusive of pancake and waffle mix), frosting, frozen waffle, syrup and yogurt categories. Although we believe that these sources are reliable, neither we nor the underwriters can guarantee the accuracy or completeness of this information and neither we nor the underwriters have independently verified this information. Additionally, from time to time, these sources may change their input information or methodologies, which may change the related results. While we believe the estimated market position, market opportunity and market size information included in this prospectus is generally reliable, such information, which is derived in part from management’s estimates and beliefs, is inherently uncertain and imprecise. Other market data and industry information is based on management’s knowledge of the industry and good faith estimates of management. All of the market data, panel data and industry information used in this prospectus involves a number of assumptions and limitations, and you are cautioned not to give

 

ii

 

undue weight to such estimates. Projections, assumptions and estimates of our future performance and the future performance of the industry in which we operate are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors,” “Cautionary Note Regarding Forward-Looking Statements” and elsewhere in this prospectus. These and other factors could cause results to differ materially from those expressed in our estimates and beliefs and in the estimates prepared by independent parties.

This prospectus also presents metrics related to visitors to our brand websites and to our presence on third-party social media sites, such as the number of visitors to our registered domains. These metrics contain certain limitations. The number of visitors to our websites has not been independently verified, and there are inherent challenges in measuring our unique visitors accurately. Further, we have relied on the calculations and analysis conducted by the social media sites and our use of third-party analytics tools to present metrics that, as closely as possible, reflect genuine users and legitimate user activity on the respective platforms. However, data from such sources may include inaccuracies, such as information relating to fraudulent accounts or interactions with our sites and social media accounts or those of the social media “influencers” with whom we partner. Such inaccuracies and fraudulent accounts or interactions may be caused by the use of bots or other mechanisms to generate false impressions, persons with multiple accounts on one service, persons with deactivated or inactive accounts and multiple views by the same user. We have only a limited ability to independently verify the metrics provided by social media sites and third-party analytics tools. Investors should not place undue reliance or emphasis on website visits or social media measures given these limitations and the fact that such measures do not bear any direct relationship to our financial condition or results of operations.

Basis of Presentation

Prior to this offering, 100% of the common equity of Sovos Brands, Inc. was held by Sovos Brands Limited Partnership (the “Partnership”). The limited partners of the Partnership include funds managed by Advent International Corporation (“Advent” or the “Sponsor”), our executive officers, other employees and other investors. An affiliate of Advent is the general partner of the Partnership.

The Partnership previously awarded incentive units to our executive officers and certain of our employees as equity-based compensation (the “Incentive Units”). The Incentive Units include: (i) service-based Incentive Units that vest at a rate of 6.25% quarterly, subject to continued employment through the vesting date (the “Time-Based Incentive Units”), and (ii) performance-based Incentive Units that vest, subject to continued employment through the vesting date, upon Advent’s receipt of aggregate cash amounts (including marketable securities, as such term is defined in the Incentive Unit award agreements) representing at least a multiple on Advent’s invested capital (“MOIC”) of 2.0 MOIC, 2.5 MOIC, 3.0 MOIC and 4.0 MOIC, as applicable, with linear interpolation between MOIC achievement levels (the “Performance-Based Incentive Units”).

In connection with this offering, the Partnership intends to distribute its shares of our common stock to its limited partners, in accordance with the applicable terms of its partnership agreement. As a result of the distribution, the limited partners holding capital interests will receive an aggregate of 74,058,447 shares of our common stock.

With respect to the Incentive Units, in connection with this offering, holders of vested Time-Based Incentive Units will receive shares of our common stock and holders of unvested Time-Based Incentive Units and Performance-Based Incentive Units will receive shares of restricted common stock pursuant to a restricted stock award agreement with us. Such shares of restricted common stock are included in the 74,058,447 shares described above. The restricted stock award agreements will set forth the terms of the restrictions, including vesting terms, which will be substantially the same as those of the previously awarded Incentive Units. Accordingly, upon the consummation of the offering: (i) holders of Time-Based Incentive Units will receive an aggregate of 1,375,052 shares of our common stock for their Time-Based Incentive Units, 219,023 shares of which will be shares of restricted common stock subject to continued time-based vesting; and (ii) holders of Performance-Based Incentive Units will receive an aggregate of 3,636,491 shares of our common stock for their Performance-Based Incentive Units, which remain subject to performance-based vesting. For purposes of estimating the number of shares issuable to the holders of the Time-Based Incentive Units and Performance-Based Incentive Units, we deemed all of the Incentive Units vested and

 

iii

 

assumed a hypothetical liquidation of the Partnership based on a value equal to the initial public offering price of $15.00 per share (the midpoint of the estimated public offering price range set forth on the cover page of this prospectus). The actual number of shares of restricted common stock subject to time-based vesting and performance-based vesting is dependent upon the final public offering price in this offering. Pursuant to the applicable restricted stock award agreements, any shares of restricted common stock issued to holders of Incentive Units that do not vest will be forfeited back to the Partnership and distributed to the limited partners when the Partnership is liquidated.

 

iv

 

LETTER FROM OUR FOUNDER, PRESIDENT AND CHIEF EXECUTIVE OFFICER

Dear Prospective Stockholders,

I think there are fewer things better in life than enjoying delicious food surrounded by family and friends. There was nothing like the joy of a delicious pumpkin pie at Thanksgiving as a child, or now as an adult sharing steak pizzaiola with Rao’s Homemade Arrabbiata sauce with my family. Good food is often at the heart of so many memories.

When I set out to build Sovos Brands, I wanted to create a different kind of food company. One that is disruptive and growth oriented, focusing on “one-of-a-kind” brands with simple, high-quality ingredients, cleaner labels, authenticity, and — most importantly — providing absolutely delicious taste. Today, we are the fastest growing food company of scale in the United States.

Throughout my 30-year career in traditional CPG working on emerging and established brands globally, I noticed a growing trend of large, billion-dollar center-store brands frequently losing share to smaller, high-growth “disruptor” or “challenger” brands. The opportunity to build a food platform designed to acquire, integrate and accelerate premium “one-of-a-kind” brands in the early stages of growth was clear. With this vision in mind, I partnered with Bill Johnson, our Chairman, and Advent to begin building Sovos.

To truly create a differentiated company, we knew we needed to begin with great talent. Since our inception, we’ve combined a distinctive mix of industry veterans, entrepreneurs and food lovers to build a world-class leadership team. Together, we have built a dynamic, growth-oriented culture designed so that every employee has a voice, and anchored in our guiding principles:

•

Lead with courage and tenacity

​

•

Focus on quality

​

•

Obsess with the front line

​

•

Communicate with candor and respect

​

•

Be nimble

​

•

Enjoy the ride

​

And, importantly, providing delicious food for joyful living every single day.

Over the past five years, we have acquired four brands — Michael Angelo’s, Rao’s, noosa and Birch Benders — that provide consumers absolutely delicious food for the way they live. As a result, we have seen tremendous growth and success. And we still have significant growth opportunities in household penetration as well as large innovation whitespace for TAM expansion. As we look ahead, we believe the opportunity to acquire other “one-of-a-kind” brands is vast.

And while we are in the early stages, we are committed to good corporate citizenship and advancing environmental, social and governance (ESG) initiatives. Recent examples of our initiatives include engaging with third party partners to manage waste leaving our facilities with the goal of landfill reduction; and noosa packaging redesign to reduce the use of plastics. We are proud of our gender diversity, with women representing approximately half of our employee leadership through the Director level. We will continue to strive for further racial and ethnic diversity across the Sovos organization.

Today, Sovos is exactly what we set out to create — a high-growth, purposefully-built food platform and growth accelerator with a portfolio of “one-of-a-kind” brands. All four of our brands — Rao’s, Michael Angelo’s, noosa and Birch Benders — are built with authenticity at their core and high-quality ingredients, providing food experiences that are genuine, delicious and unforgettable. And we still have a long runway in each of these brands that supports our algorithm for sustainable long-term profitable growth.

We have achieved so much in a short period of time, but we still have tremendous room for growth ahead of us! We believe we are creating a new approach to packaged food, and we welcome you as we embark upon the next stage of our journey.

Sincerely,

Todd Lachman
Founder, President and CEO
Sovos Brands

 

v

 

​

1

 

2

 

​	Brand Net Sales by Brand(1)	​	​	Brand Net Sales by Product(1)	​
​		​	​		​

​

3

 

​

4

 

5

 

​

6

 

7

 

8

 

9

 

10

 

11

 

12

 

13

 

14

 

15

 

​

16

 

​

17

 

​

​

​

26 Weeks Ended

​

​

Fiscal Year Ended

​

​

​

​

June 26, 2021

​

​

June 27, 2020

​

​

December 26, 2020

​

​

December 28, 2019

​

​

​

​

(in thousands, except per share data)

​

Consolidated Statement of Operations Data

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Net sales

​

​

​

$

351,209

​

​

​

​

$

261,408

​

​

​

​

$

560,067

​

​

​

​

$

388,004

​

​

Cost of sales

​

​

​

​

239,764

​

​

​

​

​

174,726

​

​

​

​

​

373,314

​

​

​

​

​

275,386

​

​

Gross Profit

​

​

​

​

111,445

​

​

​

​

​

86,682

​

​

​

​

​

186,753

​

​

​

​

​

112,618

​

​

Operating expenses:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Selling, general and administrative expenses

​

​

​

​

60,178

​

​

​

​

​

50,199

​

​

​

​

​

124,612

​

​

​

​

​

94,480

​

​

Depreciation and amortization expense

​

​

​

​

14,395

​

​

​

​

​

11,872

​

​

​

​

​

24,744

​

​

​

​

​

23,771

​

​

Loss on extinguishment of debt

​

​

​

​

9,717

​

​

​

​

​

—

​

​

​

​

​

—

​

​

​

​

​

—

​

​

Impairment of goodwill and intangible assets(1)

​

​

​

​

—

​

​

​

​

​

—

​

​

​

​

​

—

​

​

​

​

​

17,163

​

​

Total operating expenses

​

​

​

​

84,290

​

​

​

​

​

62,071

​

​

​

​

​

149,356

​

​

​

​

​

135,414

​

​

Operating income (loss)

​

​

​

​

27,155

​

​

​

​

​

24,611

​

​

​

​

​

37,397

​

​

​

​

​

(22,796)

​

​

Interest expense

​

​

​

​

12,066

​

​

​

​

​

10,619

​

​

​

​

​

19,895

​

​

​

​

​

22,975

​

​

Income (loss) before income tax (expense) benefit

​

​

​

​

15,089

​

​

​

​

​

13,992

​

​

​

​

​

17,502

​

​

​

​

​

(45,771)

​

​

Income tax (expense) benefit

​

​

​

​

(4,716)

​

​

​

​

​

(4,924)

​

​

​

​

​

(6,677)

​

​

​

​

​

18,626

​

​

Net income (loss)

​

​

​

$

10,373

​

​

​

​

$

9,068

​

​

​

​

$

10,825

​

​

​

​

$

(27,145)

​

​

Earnings per share data:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Basic earnings (loss) by common share

​

​

​

$

0.14

​

​

​

​

$

0.12

​

​

​

​

$

0.15

​

​

​

​

$

(0.37)

​

​

Diluted earnings (loss) by common share

​

​

​

$

0.13

​

​

​

​

$

0.12

​

​

​

​

$

0.14

​

​

​

​

$

(0.37)

​

​

Weighted average basic common shares outstanding

​

​

​

​

74,058,447

​

​

​

​

​

74,058,719

​

​

​

​

​

74,058,569

​

​

​

​

​

73,912,746

​

​

Weighted average diluted common shares outstanding

​

​

​

​

77,041,809

​

​

​

​

​

76,103,012

​

​

​

​

​

75,921,065

​

​

​

​

​

73,912,746

​

​

Pro forma basic earnings (loss) by common share(2).

​

​

​

$

0.24

​

​

​

​

​

​

$

0.17

​

​

​

​

Pro forma diluted earnings (loss) by common share(2)

​

​

​

$

0.24

​

​

​

​

​

​

$

0.17

​

​

​

​

Pro forma weighted average basic common shares outstanding(2)

​

​

​

​

97,392,447

​

​

​

​

​

​

​

​

​

​

​

97,392,569

​

​

​

​

Pro forma weighted average diluted common shares outstanding(2)

​

​

​

​

97,392,447

​

​

​

​

​

​

​

97,392,569

​

​

​

​

18

 

​

​

​

At June 26, 2021

​

​

​

​

Actual

​

​

As Adjusted(3)

​

​

​

​

(in thousands)

​

Consolidated Balance Sheet Data (at end of period)

​

​

​

​

​

​

​

​

​

​

​

​

​

Total assets

​

​

​

$

1,182,405

​

​

​

​

$

1,188,899

​

​

Long-term debt(4)

​

​

​

​

780,000

​

​

​

​

​

465,000

​

​

Capital leases

​

​

​

​

7,129

​

​

​

​

​

7,129

​

​

Total stockholders’ equity

​

​

​

​

214,179

​

​

​

​

​

535,673

​

​

​

​

​

26 Weeks Ended

​

​

Fiscal Year Ended

​

​

​

​

June 26, 2021

​

​

June 27, 2020

​

​

December 26, 2020

​

​

December 28, 2019

​

​

​

​

(in thousands)

​

Other Financial Data

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Brand net sales(5)

​

​

​

$

351,209

​

​

​

​

$

290,997

​

​

​

​

$

608,754

​

​

​

​

$

421,804

​

​

Adjusted net income(5)

​

​

​

$

34,125

​

​

​

​

$

23,681

​

​

​

​

$

44,105

​

​

​

​

$

10,835

​

​

EBITDA(5)

​

​

​

$

45,963

​

​

​

​

$

41,071

​

​

​

​

$

71,194

​

​

​

​

$

10,259

​

​

Adjusted EBITDA(5)

​

​

​

$

62,879

​

​

​

​

$

47,292

​

​

​

​

$

91,132

​

​

​

​

$

42,346

​

​

EBITDA margin(5)

​

​

​

​

13.1%

​

​

​

​

​

15.7%

​

​

​

​

​

12.7%

​

​

​

​

​

2.6%

​

​

Adjusted EBITDA margin(5)

​

​

​

​

17.9%

​

​

​

​

​

18.1%

​

​

​

​

​

16.3%

​

​

​

​

​

10.9%

​

​

Dollars and shares in thousands, except per share amounts

​

​

26 Weeks Ended June 26, 2021 (unaudited)

​

​

Fiscal Year Ended December 26, 2020 (unaudited)

​

Numerator

​

​

​

​

​

​

​

​

Net income attributable to basic common shares

​

​

​

$

10,373

​

​

​

​

$

10,825

​

​

Adjust for interest paid on term loans and extinguishment of debt(a)

​

​

​

​

12,648

​

​

​

​

​

6,178

​

​

Pro forma net income attributable to basic common shares

​

​

​

$

23,021

​

​

​

​

$

17,003

​

​

Denominator

​

​

​

​

​

​

​

​

Weighted average basic common shares outstanding

​

​

​

​

74,058,447

​

​

​

​

​

74,058,569

​

​

Add: common shares offered hereby to repay a portion of debt

​

​

​

​

23,334,000

​

​

​

​

​

23,334,000

​

​

Pro forma weighted average basic common shares outstanding

​

​

​

​

97,392,447

​

​

​

​

​

97,392,569

​

​

Pro forma weighted average diluted common shares outstanding

​

​

​

​

97,392,447

​

​

​

​

​

97,392,569

​

​

Pro forma basic earnings by common share

​

​

​

$

0.24

​

​

​

​

$

0.17

​

​

Pro forma diluted earnings by common share

​

​

​

$

0.24

​

​

​

​

$

0.17

​

​

​

19

 

20

 

​

​

​

26 Weeks Ended

​

​

Fiscal Year Ended

​

​

​

​

June 26, 2021

​

​

June 27, 2020

​

​

December 26, 2020

​

​

December 28, 2019

​

​

​

​

(in thousands)

​

Net Income (Loss)

​

​

​

$

10,373

​

​

​

​

$

9,068

​

​

​

​

$

10,825

​

​

​

​

$

(27,145)

​

​

Interest

​

​

​

​

12,066

​

​

​

​

​

10,619

​

​

​

​

​

19,895

​

​

​

​

​

22,975

​

​

Income Tax Expense (Benefit)

​

​

​

​

4,716

​

​

​

​

​

4,924

​

​

​

​

​

6,677

​

​

​

​

​

(18,626)

​

​

Depreciation and amortization

​

​

​

​

18,808

​

​

​

​

​

16,460

​

​

​

​

​

33,797

​

​

​

​

​

33,055

​

​

EBITDA

​

​

​

​

45,963

​

​

​

​

​

41,071

​

​

​

​

​

71,194

​

​

​

​

​

10,259

​

​

Impairment of Goodwill and Intangible Assets(1)

​

​

​

​

—

​

​

​

​

​

—

​

​

​

​

​

—

​

​

​

​

​

17,163

​

​

Transaction and Integration Costs(2)

​

​

​

​

3,510

​

​

​

​

​

3,382

​

​

​

​

​

12,396

​

​

​

​

​

5,425

​

​

Initial Public Offering Readiness(3)

​

​

​

​

2,059

​

​

​

​

​

154

​

​

​

​

​

2,701

​

​

​

​

​

280

​

​

21

 

​

​

​

26 Weeks Ended

​

​

Fiscal Year Ended

​

​

​

​

June 26, 2021

​

​

June 27, 2020

​

​

December 26, 2020

​

​

December 28, 2019

​

​

​

​

(in thousands)

​

Non-Cash Equity-Based Compensation(4)

​

​

​

​

1,105

​

​

​

​

​

973

​

​

​

​

​

1,915

​

​

​

​

​

2,134

​

​

Supply Chain Optimization(5)

​

​

​

​

—

​

​

​

​

​

992

​

​

​

​

​

1,914

​

​

​

​

​

2,459

​

​

Non-recurring Costs(6)

​

​

​

​

10,242

​

​

​

​

​

720

​

​

​

​

​

1,012

​

​

​

​

​

4,626

​

​

Adjusted EBITDA

​

​

​

$

62,879

​

​

​

​

$

47,292

​

​

​

​

$

91,132

​

​

​

​

$

42,346

​

​

EBITDA margin

​

​

​

​

13.1%

​

​

​

​

​

15.7%

​

​

​

​

​

12.7%

​

​

​

​

​

2.6%

​

​

Adjusted EBITDA margin

​

​

​

​

17.9%

​

​

​

​

​

18.1%

​

​

​

​

​

16.3%

​

​

​

​

​

10.9%

​

​

​

​

​

26 Weeks Ended

​

​

Fiscal Year Ended

​

​

​

​

​

June 26, 2021

​

​

June 27, 2020

​

​

December 26, 2020

​

​

December 28, 2019

​

​

December 29, 2018

​

​

​

​

​

(in thousands)

​

Net Sales

​

​

​

$

351,209

​

​

​

​

$

261,408

​

​

​

​

$

560,067

​

​

​

​

$

388,004

​

​

​

​

$

203,352

​

​

​

noosa net sales prior to acquisition

​

​

​

​

—

​

​

​

​

​

—

​

​

​

​

​

—

​

​

​

​

​

—

​

​

​

​

​

149,486

​

​

​

Birch Benders net sales prior to acquisition

​

​

​

​

—

​

​

​

​

​

29,589

​

​

​

​

​

48,687

​

​

​

​

​

33,800

​

​

​

​

​

21,129

​

​

​

Brand Net Sales

​

​

​

$

351,209

​

​

​

​

$

290,997

​

​

​

​

$

608,754

​

​

​

​

$

421,804

​

​

​

​

$

373,967

​

​

​

22

 

​

​

​

26 Weeks Ended

​

​

Fiscal Year Ended

​

​

​

​

June 26, 2021

​

​

June 27, 2020

​

​

December 26, 2020

​

​

December 28, 2019

​

​

​

​

(in thousands)

​

Net Income (Loss)

​

​

​

$

10,373

​

​

​

​

$

9,068

​

​

​

​

$

10,825

​

​

​

​

$

(27,145)

​

​

Impairment of Goodwill and Intangible Assets(1)

​

​

​

​

—

​

​

​

​

​

—

​

​

​

​

​

—

​

​

​

​

​

17,163

​

​

Transaction and Integration Costs(2)

​

​

​

​

3,510

​

​

​

​

​

3,382

​

​

​

​

​

12,396

​

​

​

​

​

5,425

​

​

Initial Public Offering Readiness(3)

​

​

​

​

2,059

​

​

​

​

​

154

​

​

​

​

​

2,701

​

​

​

​

​

280

​

​

Non-Cash Equity-Based Compensation(4)

​

​

​

​

1,105

​

​

​

​

​

973

​

​

​

​

​

1,915

​

​

​

​

​

2,134

​

​

Supply Chain Optimization(5)

​

​

​

​

—

​

​

​

​

​

992

​

​

​

​

​

1,914

​

​

​

​

​

2,459

​

​

Non-Recurring Costs(6)

​

​

​

​

10,242

​

​

​

​

​

720

​

​

​

​

​

1,012

​

​

​

​

​

4,626

​

​

Acquisition amortization(7)

​

​

​

​

13,619

​

​

​

​

​

11,213

​

​

​

​

​

23,228

​

​

​

​

​

22,539

​

​

Tax Effect of Adjustments(8)

​

​

​

​

(7,103)

​

​

​

​

​

(2,821)

​

​

​

​

​

(10,391)

​

​

​

​

​

(8,624)

​

​

One-Time Tax Expense (Benefit) Items(9)

​

​

​

​

320

​

​

​

​

​

—

​

​

​

​

​

505

​

​

​

​

​

(8,022)

​

​

Adjusted Net Income

​

​

​

$

34,125

​

​

​

​

$

23,681

​

​

​

​

$

44,105

​

​

​

​

$

10,835

​

​

​

23

 

RISK FACTORS

An investment in our common stock involves a high degree of risk. You should carefully consider each of the following risk factors, as well as other information contained in this prospectus, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited consolidated financial statements and related notes, before investing in our common stock. The occurrence of any of the following risks could materially and adversely affect our business, financial condition, results of operations, in which case the trading price of our common stock could decline and you could lose all or part of your investment.

Risks Related to Our Business and Our Industry

The packaged food industry is highly competitive. Our product categories face a high level of competition, which could have a material adverse effect on our business, financial condition and results of operations.

The packaged food industry is highly competitive. Numerous brands and products, including private label products and insurgent brands, compete for shelf space and sales, with competition based primarily on product quality and taste, convenience, price, trade promotion, brand recognition and loyalty, customer service, effective consumer advertising and promotional activities, access to shelf space and the ability to identify and satisfy emerging consumer preferences.

We compete with a significant number of companies of varying sizes, including large multi-brand consumer packaged food companies, smaller product-focused companies, emerging companies and dairy products- and dairy alternative-focused companies. Some of our markets are dominated by multinational corporations with greater resources and more substantial operations than us. Many of these large multi-brand competitors have substantial financial, marketing, research and development and other resources and we may not be able to successfully compete for sales to distributors or retailers that purchase from larger competitors. Competing large multi-brand consumer packaged food companies, including B&G Foods, Inc., Barilla Holding S.p.A., Campbell Soup Company, Conagra Brands, Inc., Continental Mills, Inc., General Mills, Inc., The Hain Celestial Group, Inc., the J.M. Smucker Company, the Kellogg Company, The Kraft Heinz Company, Mizkan Holdings, Nestle S.A. and PepsiCo, Inc. may be able to use their resources and scale to respond to competitive pressures and changes in consumer preferences by introducing new products or reformulating their existing products, reducing prices or increasing promotional activities. We also compete with smaller and more product-focused companies, including Amy’s Kitchen, Bob’s Red Mill Natural Foods, Inc., G.L. Mezzetta, Inc., Kodiak Cakes, LLC, Newman’s Own, Inc. and Van’s International Foods, which may be more innovative and able to bring new products to market faster and more quickly exploit and serve niche markets or new or burgeoning consumer preferences. Smaller insurgent brands we compete with may develop a customer base and customer loyalty quickly. In addition, we compete against companies focused on dairy and dairy-alternative products, such as Chobani, LLC, Danone S.A., Fage International S.A. and The Lactalis Group.

Competitive pressures may restrict our ability to increase prices and maintain such price increases in response to commodity and other cost increases. Failure to effectively assess, timely change and properly set pricing, promotions or incentives may negatively impact our ability to achieve the objectives of such price increases.

In addition, reduced barriers to entry, easier access to funding and factors associated with the COVID-19 pandemic, such as increased cash flows caused by spikes in consumer demand and efforts by retailers to reduce the numbers of SKUs on their shelves, could cause competition to intensify. Our Rao’s Made for Home and Michael Angelo’s frozen products may compete with each other, and most retailers also offer private label products that also compete for retail shelf space and consumer purchases. As a result of competition, retailers may take actions that negatively affect us. Consequently, we may need to increase our marketing, advertising and promotional spending to protect our existing market share. The inability to increase our market share, the loss of market share to our competitors and increased costs associated with increasing our market share or protecting our existing market share could have a material adverse effect on our business, financial condition and results of operations.

 

24

 

The COVID-19 pandemic and associated responses could have a material adverse effect on our business, financial condition and results of operations.

The COVID-19 pandemic has significantly impacted economic activity and markets throughout the world. In response, governmental authorities have implemented numerous measures in an attempt to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place orders and business shutdowns. Although our business has benefitted from some of these measures, the impact and associated responses of the COVID-19 pandemic could have a material adverse effect on our business, financial condition and results of operations in a number of ways, including but not limited to:

•

shutdown of one or more of our manufacturing, warehousing or distribution facilities, or disruption in our supply chain, including but not limited to as a result of illness, government restrictions or other workforce disruptions;

​

•

the failure of third parties on which we rely, including but not limited to third parties that supply our co-packed products, raw materials, packaging materials and other necessary operating materials, to meet their obligations to us, or significant disruptions in their ability to do so;

​

•

increased costs and limited supply as well as a strain on our supply chain, which could result from continued increased customer and consumer demand for our products;

​

•

a disruption to the production of our products in Italy and delays in shipment of our products from Italy, including those caused by reduced shipping container availability or congestion at the ports where we or our co-packer do business;

​

•

a disruption to our distribution capabilities or to our distribution channels, including those of our suppliers, co-packers, logistics service providers or third-party distributors;

​

•

a disruption to, and increased costs of, distribution and transportation of our frozen and refrigerated products due to the frozen or refrigerated transportation required for distribution of a COVID-19 vaccine;

​

•

reductions in the availability of one or more of our products as we prioritize the production of other products due to increased demand;

​

•

a disruption to the operability or availability of our equipment, including equipment necessary to expand our or our co-packers’ and suppliers’ production capacity;

​

•

changes to and delays in our product innovation efforts;

​

•

new or escalated government or regulatory responses in markets where we manufacture, sell or distribute our products, or in the markets of third parties on which we rely, which could prevent or disrupt our business operations;

​

•

a significant portion of our workforce, including our management team, could become unable to work as a result of illness, or the attention of our management team could be diverted if key employees become ill from COVID-19 and unable to work;

​

•

higher costs in certain areas, such as front-line employee compensation, as well as incremental costs associated with newly added health screenings, temperature checks and enhanced cleaning and sanitation protocols to protect our employees, which could continue or could increase in these or other areas;

​

•

the temporary inability of consumers to purchase our products due to illness, quarantine or other travel restrictions or financial hardship, decrease in demand due to the easing of governmental authority restrictions and business closings or decrease in pantry-loading activity;

​

•

a change in demand for or availability of our products as a result of retailers, distributors or carriers modifying their inventory, fulfillment or shipping practices;

​

•

an inability to effectively modify our trade promotion and advertising activities to reflect changing consumer shopping habits due to, among other things, reduced in-store visits and travel restrictions;

​

 

25

 

•

a shift in consumer spending as a result of an economic downturn could result in consumers purchasing more generic, private label or lower-price products or foregoing certain purchases altogether;

​

•

an increased reliance on our information technology systems due to many employees working remotely, which could cause us to be increasingly susceptible to cyberattacks and other cyber incidents; and

​

•

continued business disruptions and uncertainties related to the COVID-19 pandemic for a sustained period of time, which could result in additional delays or modifications to our strategic plans and other initiatives and hinder our ability to achieve anticipated cost savings and efficiency initiatives on the original timelines.

​

These and other impacts of the COVID-19 pandemic could also have the effect of heightening many of the other risk factors included in this section. The ultimate impact of the COVID-19 pandemic depends on the severity and duration of the pandemic and actions taken by governmental authorities and other third parties in response, each of which is uncertain, rapidly changing and difficult to predict. Any of these disruptions could have a material adverse effect on our business, financial condition and results of operations. Additionally, a decrease in at-home eating after the COVID-19 pandemic or reduction of related restrictions could negatively impact the categories in which we compete and demand for our products, which could have a material adverse effect on our business, financial condition and results of operations.

We may have difficulties identifying, consummating or integrating new acquisitions or realizing the projected benefits of acquisitions.

A core part of our strategy is to grow through acquisitions. We successfully completed the Birch Benders Acquisition and the Noosa Acquisition in October 2020 and November 2018, respectively, and we expect to pursue additional acquisitions. However, we may be unable to identify and consummate additional acquisitions, and we may incur significant transaction costs for acquisitions that we do not complete. Brands are often sold through an auction process, and although we may invest significant resources and devote considerable amounts of time to the auction process, we may not be the winning bidder.

In addition, we may not successfully integrate and manage brands that we acquire or achieve anticipated cost savings and targeted synergies from acquisitions in the timeframe we anticipate or at all. Acquisitions involve numerous risks, including difficulties in assimilating and realizing targeted synergies in the sales, distribution, purchasing, manufacturing and warehousing capabilities of the acquired companies, personnel turnover and the diversion of management’s attention from other business concerns. We may not successfully complete our integration of the Birch Benders business, and realization of the expected benefits from the Birch Benders Acquisition will depend, in part, on our ability to realize the projected growth opportunities and cost synergies as a result of the acquisition. Our projections for the Birch Benders Acquisition were based on assumptions which may not be reliable or accurate and may be impacted by uncertainties, including those related to the COVID-19 pandemic. Projected growth opportunities could require a greater-than-anticipated amount of trade and promotional spending. There can be no assurance that we will successfully or efficiently integrate any brands that we may acquire in the future, and the failure to do so could have a material adverse effect on our business, financial condition and results of operations. Future acquisitions by us could also result in our issuing additional equity securities, which could be dilutive to our then existing stockholders, as well as incurring substantial additional indebtedness, exposure to contingent liabilities or incurring the impairment of goodwill and other intangible assets, all of which could have a material adverse effect on our business, financial condition and results of operations.

Financial market conditions may impede our access to, or increase the cost of, financing for acquisitions.

The COVID-19 pandemic has increased volatility and pricing in the capital markets, and any future financial market disruptions or tightening of the credit markets may make it more difficult for us to obtain financing on terms we find acceptable for acquisitions or other purposes or increase the cost of obtaining financing. In addition, our future borrowing costs may be affected by short- and long-term debt ratings assigned by independent rating agencies that are based, in significant part, on our performance as measured by credit metrics, such as interest coverage and leverage ratios. A decrease in these ratings could increase

 

26

 

our cost of borrowing or make it more difficult for us to obtain financing when needed or on terms we find acceptable. Limited access to or increased cost associated with financing acquisitions may limit our ability to acquire additional brands, which could have a material adverse effect on our business, financial condition and results of operations.

We may not be able to effectively manage our growth, which could have a material adverse effect on our business, financial condition and results of operations.

We have a limited operating history as a combined company due to our recent completions of the Birch Benders Acquisition and the Noosa Acquisition in October 2020 and November 2018, respectively. Our rapid growth has placed, and may continue to place, significant demands on our organizational, administrative and operational infrastructure, including manufacturing operations, supply chain, quality control, regulatory support, customer service, sales force management and general and financial administration. As we continue to grow and acquire brands, we will need to continue building our operational, financial and management controls as well as our reporting systems and procedures. Managing our planned growth effectively may require us to:

•

enhance our facilities and purchase additional equipment at our facilities;

​

•

upgrade or enhance our information technology systems; and

​

•

successfully hire, train and motivate additional employees.

​

If we are unable to manage our growth effectively, we may be unable to execute our business plan, which could have a material adverse effect on our business, financial condition and results of operations.

Our future growth and continued success depend upon consumer preferences for our products, which could change. If we fail to anticipate and respond to changes in consumer preferences, demand for our products could decline.

Our business is primarily focused on sales of premium, on-trend and high-quality products, and a future decrease in consumer demand for such products could have a material adverse effect on our business, financial condition and results of operations. Consumer demand could change based on a number of possible factors, including dietary and nutritional values, such as the popularity of “keto” and “paleo” diets, and lifestyle habits, such as a potential shift away from eating at home; concerns regarding the health effects of ingredients; product packaging preferences; and factors associated with an economic downturn or the COVID-19 pandemic, such as increased unemployment, decreases in disposable income and declines in consumer confidence. While we continue to diversify our product offerings, developing new products entails risks. A failure to offer products that consumers want to buy, accurately predict which shifts in consumer preferences will be long-lasting or introduce new and improved products to satisfy those preferences could have a material adverse effect on our business, financial condition and results of operations. In addition, given the variety of backgrounds and identities of consumers in our consumer base, we must offer a sufficient array of products to satisfy the broad spectrum of consumer preferences. As such, we must be successful in developing innovative products across a multitude of product categories. A failure to anticipate and respond to changes in consumer preferences or a significant shift in consumer demand away from our products could reduce the sales of our brands or our market share, any of which could have a material adverse effect on our business, financial condition and results of operations.

If we are unable to successfully introduce new products or if recently launched products do not meet expectations or are de-listed, it could have a material adverse effect on our business, financial condition and results of operations.

Our success is dependent on anticipating changes in consumer preferences and successful new product development and product launches in both our existing and adjacent market categories in response to such changes. Trends within the packaged food industry change often, and failure to identify and react to changes in these trends, could lead to, among other things, reduced loyalty, reduced demand and price reductions for our brands and products. In addition, our misperception of the acceptance of our brands, or brands that we may acquire in the future, could limit our ability to innovate in adjacent market categories. While we devote significant efforts to the development of new products and to the research, development and technology

 

27

 

process functions of our business, we may underestimate the costs of new products or we may not be successful in developing new products cost-effectively or at all. We could incur significant costs, including for slotting, for products that are commercially successful as well as for products that may initially gain customer or consumer acceptance but are ultimately unsuccessful. The success of our innovation and product improvement efforts is affected by our ability to anticipate changes in consumers’ preferences; the level of funding that can be made available; the technical capability of our research and development staff in developing, formulating and testing product prototypes; our compliance with governmental regulations; and the success of our management in introducing the resulting new products or improvements in a timely manner.

Even if we are successful in introducing new or recently launched products, sales generated by new products could cause a decline in sales of our existing products, or new products could have lower margins than our existing products. Our future results and our ability to maintain or improve our competitive position will depend on our capacity to gauge the direction of our key markets and our ability to successfully identify, develop, manufacture, market and sell new or improved products in these changing markets, and a failure to do so effectively could have a material adverse effect on our business, financial condition and results of operations.

Our sales and profit growth are dependent on our ability to expand existing market penetration and enter into new markets. If we are unable to increase distribution of our products, it could adversely affect our ability to grow our business.

Successful growth depends on our ability to secure increased distribution of our products by adding new customers, increasing the number of stores that sell our products, increasing the number of our products our customers offer for sale and enhancing our product portfolio with innovative and profitable products. This growth would also include expanding our retail shelf placement and priority as well as increasing access to alternative retail channels, such as e-commerce retailers, to sell our products. If our customers reduce the frequency of their shelf resets, whether as a result of increased labor costs, labor shortages or other factors, or decrease the shelf space devoted to the categories in which we compete, our ability to expand distribution of our products could be adversely impacted. The COVID-19 pandemic impacted our product innovation and growth efforts in fiscal 2020 as a result of our customers modifying their shelf reset timings, reducing in store-displays and promotional activities and shifting their ordering patterns. Additionally, the COVID-19 pandemic caused our customers to focus on ensuring that key products remain in stock. To the extent customers continue to focus on ensuring shelf space for key products, future shelf-space opportunities for new products may be impacted. Our inability to successfully increase distribution of our products could have a material adverse effect on our business, financial condition and results of operations.

Our sales and profit growth are dependent on our ability to expand household penetration and the success of our marketing programs. If we are unable to increase household penetration of our products, it could adversely affect our ability to grow our business.

Successful growth depends on our ability to increase our household penetration by reaching new consumers and on our ability to increase purchases by existing consumers of our products, and we seek to maintain and improve our brand image through marketing investments, including advertising and consumer promotions. However, retailers and our competitors may continue to aggressively market their branded and private label products, which could reduce demand for our products. To compete effectively, increase our household penetration, increase purchases by our existing consumers and maintain and improve our brand image, we may need to increase or reallocate spending on marketing and promotional activities, such as rebates, temporary price reductions, off-invoice discounts, retailer advertisements, product coupons and other trade activities. These expenditures are subject to risks, including risks related to consumer acceptance of our efforts, the rapidly changing media environment, costs of advertising through social and digital media outlets and consumers’ use of the social and digital media outlets where we market our brands. We rely primarily on social media and online dissemination of our advertising campaigns, and the success of our brands, and our growth, may suffer if our marketing plans or product initiatives do not have the desired impact on a brand’s image or its ability to attract consumers or drive frequency of purchase. Our inability

 

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to successfully increase household penetration of our products or increase purchases by our existing consumers could have a material adverse effect on our business, financial condition and results of operations.

Economic downturns could limit consumer and customer demand for our products.

The willingness of consumers to purchase our products depends in part on changes in local, national and global economic conditions. Deteriorating economic and political conditions in our major markets, such as increased unemployment, decreases in disposable income and declines in consumer confidence, whether as a result of the COVID-19 pandemic or other factors, could cause a decrease in demand for our overall product set, particularly higher priced products.

In an economic downturn, consumers may purchase more generic, private label and other products that are lower in price than our products and may forego certain purchases altogether. Consumers may reduce the number of premium products that they purchase where there are mid-tier alternatives, given that premium products generally have higher retail prices than their mid-tier counterparts. Due to changes in consumer demand, we could experience a reduction in sales, a reduction in sales of higher margin products or a shift in our product mix to lower margin offerings. Our customers may also become more conservative in response to these conditions and seek to reduce their inventories or change their shelf sets to prioritize lower-price products. In addition, as a result of economic conditions or competition, we may be unable to raise our prices sufficiently to protect margins. The impacts of an economic downturn and the COVID-19 pandemic may be greater than we expect, and demand for our products may not meet our expectations in the future following the end of an economic downturn or the COVID-19 pandemic. Prolonged unfavorable economic conditions may have an adverse effect on any of these factors and could have a material adverse effect on our business, financial condition and results of operations.

Our business is highly concentrated in the United States, with little global diversification.

Our operations and our customers are mainly in the United States and, therefore, we are particularly susceptible to consumer trends, market fluctuations, including commodity price fluctuations or supply shortages of key raw materials, adverse regulations, the economic climate and other adverse events in the United States. The concentration of our businesses in the United States could present challenges and increases the likelihood that an adverse event in the United States would have a material adverse effect on our business, financial condition and results of operations.

Erosion of the reputation of one or more of our brands could have a material adverse effect on our business, financial condition and results of operations.

Maintaining and continually enhancing the value of our brands is critical to the success of our business, and consumer perceptions have a significant impact on the value of our brands. Our reputation could be adversely impacted by any of the following, or by negative publicity (whether or not valid) relating thereto: the failure to maintain high standards for the quality of our products; concerns about food safety, product recalls or other issues, such as product contamination, mislabeling or tampering; the failure to meet ethical, social and environmental expectations or standards for all of our operations, activities, employees or co-packers; the failure to achieve any stated goals with respect to the nutritional or ingredient profile of our products; the loss of third-party certifications for certain of our products as, for example, “gluten-free,” “non-GMO” or “organic;” our research and development efforts; or our environmental impact, including use of agricultural materials, packaging, energy use and waste management. A failure to comply with laws and regulations, maintain an effective system of internal controls or provide accurate and timely financial information could also hurt our reputation.

In particular, a significant product recall or any assertion that our products caused injury, illness or death could result in negative publicity, damage to our reputation with existing and potential customers or our brand image and loss of consumer confidence in the safety and/or quality of our products, ingredients or packaging. In addition, if another company recalls or experiences negative publicity related to a product in a category in which we compete, consumers might reduce their overall consumption of products in that category or customers may cancel orders for such products as a result of such events. A widespread product recall could result in significant losses due to the costs of a recall, the destruction of product

 

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inventory and lost sales due to the unavailability of product for a period of time, and we could suffer losses from a significant adverse product liability judgment.

Further, the widespread use of social and digital media by consumers has increased the speed and extent that information or misinformation and opinions can be shared, and negative posts or comments about us or our brands, employees, co-packers, products or packaging on social or digital media could seriously damage the value of our brands. Consumers have been increasingly focused on food safety and health and wellness with respect to the food products they buy. If we fail to adequately respond to any consumer concerns, we could suffer lost sales and damage our brand image or our reputation. Publicity concerning the health implications of food products generally, or changes in public perception of certain ingredients, packaging or food products, such as “keto” products, could negatively influence consumer perception and acceptance of our products and marketing programs. Damage to our reputation or loss of consumer confidence in the safety or quality our products for any of these or other reasons could result in decreased demand for our products, harm our ability to maintain premium pricing over private label products and have a material adverse effect on our business, financial condition and results of operations, as well as require additional resources to rebuild our reputation.

A substantial amount of our net sales and EBITDA comes from our Dinners and Sauces operating segment, and a slow-down or decrease in sales of Rao’s sauce products could have a material adverse effect on our business, financial condition and results of operations.

A substantial amount of our net sales is derived from our Dinners and Sauces operating segment. Sales of products in our Dinners and Sauces operating segment, which includes our Rao’s sauce products, represented approximately 70% of our net sales in fiscal 2020. We believe that sales of products in our Dinners and Sauces operating segment will continue to constitute a substantial amount of our net sales for the foreseeable future. If we gain or maintain our market share in the market for products in our Dinners and Sauces operating segment, such as our Rao’s sauce products, competitors, including companies with greater resources and more substantial operations than us, could respond by increasing competition in this market. Our business, financial condition and results of operations would be harmed by a decline in the market for products in our Dinners and Sauces operating segment, increased competition in the market for those products, disruptions in our ability to procure those products (whether due to manufacturer inability, supply chain failures or otherwise) or our failure or inability to provide sufficient investment to support and market, promote and display those products as needed to maintain or grow their competitive position or to achieve more widespread market acceptance.

Due to seasonality or changes in our promotional activities, our revenue and operating results may vary from quarter to quarter.

We have experienced, and expect to continue to experience, fluctuations in our quarterly results of operations due to the seasonal nature of our business. Consumer purchasing patterns are impacted by seasonal factors, including weather and holidays. Seasonality could cause our results of operations for an interim financial period to fluctuate and not be indicative of our full year results. Seasonality also impacts relative net sales and profitability of each quarter of the year, both on a quarter-to-quarter and year-over-year basis. If we fail to effectively manage our inventories or fluctuations in business as a result of promotional activities or other factors, seasonality could have a material adverse effect on our business, financial condition and results of operations.

We rely on the performance of major retailers, wholesalers, distributors and mass merchants for the success of our business, and if they give higher priority to other brands or products, perform poorly or declare bankruptcy, it could have a material adverse effect on our business, financial condition and results of operations.

We sell our products principally to retail outlets and wholesale distributors, including traditional supermarkets, mass merchants, warehouse clubs, wholesalers, specialty food distributors, military commissaries and non-food outlets, such as drug store chains, dollar stores and e-commerce retailers. The poor performance of our major wholesalers, retailers or chains or our inability to collect accounts receivable from our customers could have a material adverse effect on our business, financial condition and results of operations.

 

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In addition, our customers offer branded and private label products that compete directly with our products for retail shelf space and consumer purchases. Accordingly, there is a risk that our customers may give higher priority to their own products or to the products of our competitors. In the future, our customers may not continue to purchase our products or provide our products with adequate levels of promotional support or shelf space or may replace our branded products with private label products. For example, in 2020, one club retailer chose to discontinue carrying our Michael Angelo’s lasagna, electing to only carry the leading national brand and its private label brand. Such risks may be particularly acute in historically declining market categories, such as yogurt. Emerging alternative retail channels, such as online-only grocery delivery services, also continue to evolve and impact the packaged food industry. The performance of major retailers, wholesalers, specialty distributors and mass merchants and their prioritization of our brands could have a material adverse effect on our business, financial condition and results of operations.

We may be unable to grow or maintain our profitability in the face of a consolidating retail environment, and the loss of any of our largest customers could have a material adverse effect on our business, financial condition and results of operations.

In fiscal 2020, our largest customers, Costco, Walmart and KeHE Distributors, LLC (“KeHE”), accounted for approximately 16%, 13% and 11%, respectively, of our gross sales, and our top four largest customers together accounted for approximately 48% of our gross sales. We expect that a significant portion of our revenues will continue to be derived from a limited number of customers. Our customers are generally not contractually obligated to purchase from us, and make purchase decisions based on a combination of price, promotional support, product quality, consumer demand, customer service performance, their desired inventory levels and other factors. As the retail grocery trade continues to consolidate and our customers grow larger and become more sophisticated, our customers may demand lower pricing, increased promotional programs, increased deductions and allowances and consistent terms or a single ordering system. There can be no assurance that our largest customers will continue to purchase our products in the same mix or quantities, or on the same terms, as in the past. Disruption of sales to any of these customers, or to any of our other large customers, for an extended period of time could have a material adverse effect on our business, financial condition and results of operations.

Further, our customers are seeking to improve their profitability through improving efficiency, reducing their inventories, changing their shelf sets, reducing the number of brands they carry and increasing their emphasis on products that hold either the number one or number two market position and increasing their reliance on private label products, their own brand name products and generic and other economy brands. A focus by our customers on ensuring shelf space for the most popular products to avoid out-of-stocks accelerated due to the COVID-19 pandemic and may continue to accelerate. If we fail to use our sales and marketing expertise to maintain and grow retail shelf space or priority for our products, or if we lower our prices or increase promotional support of our products and are unable to increase the volume of our products sold, it could have a material adverse effect on our business, financial condition and results of operations.

In addition, alternative retail channels, such as e-commerce retailers (including key retailers with integrated traditional and digital operations and online-only grocery delivery services), subscription services, discount and dollar stores, direct-to-consumer brands, limited assortment specialty retailers, drug stores and club stores, have become more prevalent. Substantial growth in e-commerce has encouraged the entry of new competitors and business models, intensifying competition by simplifying distribution and lowering barriers to entry. This trend away from traditional retail grocery, and towards such channels, is expected to continue in the future. We have seen a shift in consumption towards the e-commerce channel during the COVID-19 pandemic and may see a more substantial shift in the future. Typically, products we sell via the e-commerce channel present unique challenges in order fulfillment. Securing trial of our products by new consumers may be challenging in e-commerce settings if consumers focus on re-ordering products that they customarily consume. The expanding presence of e-commerce retailers has impacted, and may continue to impact, consumer preferences and market dynamics, which in turn may negatively affect our sales or profits. In addition, these alternative retail channels may create consumer price deflation, affecting our customer relationships and presenting additional challenges to increasing prices in response to commodity or other cost increases. Also, if these alternative retail channels, such as e-commerce retailers, take significant share away from traditional retailers, this could have a material adverse effect on our business, financial

 

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condition and results of operations. If we are not successful in expanding sales in alternative retail channels, it could have a material adverse effect on our business, financial condition and results of operations.

Any future financial market disruptions or tightening of the credit markets could expose us to additional credit risks from customers and supply risks from suppliers and co-packers.

Any future financial market disruptions or tightening of the credit markets could result in some of our customers experiencing a significant decline in profits and/or reduced liquidity, and a significant adverse change in the financial and/or credit position of a customer could require us to assume greater credit risk relating to that customer and limit our ability to collect receivables. Such disruptions could require us to take measures to conserve cash until the markets stabilize or until alternative credit arrangements or other funding for our business needs can be arranged.

A significant adverse change in the financial and/or credit position of one of our suppliers or co-packers or a significant change in the Euro to U.S. dollar exchange rate that adversely affects one of our suppliers or co-packers could result in an interruption to the supply of our products and increased costs. This could have a material adverse effect on our business, financial condition and results of operations.

We are vulnerable to decreases in the supply of and increases in the price of ingredients and other materials and labor, manufacturing, distribution and other costs, and we may not be able to offset increasing costs through cost savings initiatives or pricing.

We purchase raw materials, including agricultural products, whole milk, almond and other flours, tomatoes, cheese, chicken and meat, and other ingredients, such as fruit preparations, from growers, commodity processors, ingredient suppliers and other food companies located primarily in the United States. We also purchase packaging materials, including tubs, caps and lids, trays, labels, corrugated cardboard, cartons and other packaging, from packaging manufacturers located primarily in the United States. Our co-manufacturers also purchase ingredients and packaging materials and can pass along cost increases to us subject, in some instances, to certain contractual limitations. Ingredients and packaging materials are subject to increases in price attributable to a number of factors, including drought and excessive rain, temperature extremes and other adverse weather events, water scarcity, scarcity of suitable agricultural land, crop size, cattle cycles, herd and flock disease, crop disease and crop pests and trade disputes, tariffs or sanctions. Certain ingredients used in some of our products are organic or non-GMO, and organic and non-GMO raw materials may be subject to additional pressures from increased demand or greater supply vulnerability. We are particularly vulnerable to agricultural disasters or pestilence resulting in price increases associated with the tomato crops in Italy and the United States, the eggplant crop in the United States and Mexico, the production of milk in the United States, honey production in the United States and Canada and powdered egg supply because of our and our co-packers’ large purchases of these materials. Crop disease and crop pests, such as insects, plant diseases and fungi, as well as herd and flock diseases, such as mad cow disease, swine influenza and avian influenza, and issues impacting pollinators and bee colonies, could impact the cost and availability of the agricultural products, meat, poultry and eggs used in our products. Factors associated with the COVID-19 pandemic have resulted in increased demand for and disrupted supply of some ingredients and packaging materials. Fluctuations in commodity prices can lead to retail price volatility and increased price competition and can influence consumer and trade buying patterns.

In addition, the costs of labor, manufacturing, energy, fuel and packaging materials and other costs related to the production and distribution of our products can from time to time increase significantly and unexpectedly. We attempt to manage these risks by entering into supply contracts and advance commodities purchase agreements from time to time and implementing cost saving measures. Our suppliers may also close, causing us to seek suitable suppliers elsewhere. Factors associated with the COVID-19 pandemic have resulted in increased demand for transportation, and due to the frozen or refrigerated transportation required for distribution of a COVID-19 vaccine, the availability and cost of transportation for our products could be impacted. Moreover, we are exposed to higher costs in certain areas, such as front-line employee compensation as well as incremental costs associated with newly added health screenings, temperature checks and enhanced cleaning and sanitation protocols to protect our employees, due to the COVID-19 pandemic. Third parties, such as co-packers, suppliers, distributors, retailers and transportation companies, are

 

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subject to similar cost pressures and may seek to pass these increased costs on to us. Competition for co-packers, including increased demand for co-packed products, could also increase the costs of manufacturing and packing our products.

Further, if we increase prices to offset higher costs, we could experience lower demand for our products and sales volumes. We recently announced that we will increase prices for Rao’s sauces, which could adversely impact demand and sales. To the extent we are unable to offset present and future cost increases related to the production and distribution of our products, it could have a material adverse effect on our business, financial condition and results of operations.

Severe weather conditions, natural disasters and other natural events can affect our manufacturing facilities, co-packers, raw material supplies or logistics and could have a material adverse effect on our business, financial condition and results of operations.

Severe weather conditions, natural disasters and other natural events, such as floods, droughts, fires, hurricanes, earthquakes, extreme temperature events, volcanic eruptions, pestilence or health pandemics, such as the COVID-19 pandemic, may affect the supply of the raw materials that we (or our co-packers) use for our products, our manufacturing facilities, our operations or the operations of third-party co-packers, transportation companies or retailers or access to ports used to import our products. For example, our yogurt plant in Colorado, which is the sole manufacturing location of our noosa spoonable yogurts, is located in a region which is affected by fires, and production at our Texas facility was temporarily interrupted in February 2021 due to severe weather conditions. La Regina di San Marzano USA, Inc. (together with its subsidiaries and affiliates, “La Regina”), the third-party co-packer that produces the substantial majority of our Rao’s Homemade sauce products, is located near Mount Vesuvius, an active volcano. Additionally, earthquakes in California, where many of our key personnel reside, could result in office closures or impact the communications infrastructure, impacting the ability of key personnel to operate our business. Competing manufacturers and co-packers may be affected differently by weather conditions, natural disasters or other natural events, depending on the location of their supplies and facilities. If our supplies of ingredients, packaging materials or finished goods are delayed or reduced, or if our or our co-packers’ manufacturing capabilities are disrupted, we may not be able to find adequate supplemental supply sources or alternative manufacturers on favorable terms or at all, which could have a material adverse effect on our business, financial condition and results of operations.

Climate change, water scarcity or legal, regulatory or market measures to address climate change or water scarcity could have a material adverse effect on our business, financial condition and results of operations.

There is growing concern that carbon dioxide and other greenhouse gases in the atmosphere may have an adverse impact on global temperatures, weather patterns and the frequency and severity of extreme weather and natural disasters. In the event that such climate change has a negative effect on agricultural productivity, we may be subject to decreased availability or less favorable pricing for certain commodities that are necessary for our products, such as whole milk, tomatoes, fruit, honey and eggplant. For example, we rely on the successful harvest of tomatoes in both the United States and Italy and purchase large quantities of eggplant, and tomato or eggplant crop sizes and quality could be adversely impacted by climate change, which in turn could harm our supply of raw materials, increase our cost of transporting and storing raw materials or disrupt the production of our products. In addition, our operations and the operations of our co-packers are dependent on the availability of water. As a result of climate change, we or our co-packers may be subject to decreased availability or less favorable pricing for water, which could impact our manufacturing or other operations.

The increasing concern over climate change also may result in more regional, federal, foreign and/or global legal and regulatory requirements to reduce or mitigate the effects of greenhouse gases. In the event that such regulations are enacted and are more aggressive than the sustainability measures that we or our co-packers are already pursuing, we or our co-packers may experience significant increases in our manufacturing and distribution costs. In particular, increasing regulation of fuel emissions could substantially increase the supply chain and distribution costs associated with our products. As a result, climate change or increased concern over climate change could have a material adverse effect on our business, financial condition and results of operations.

 

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Failure by us or third-party co-packers or suppliers of raw materials to comply with food safety, environmental or other laws or regulations, or new laws or regulations, could have a material adverse effect on our business, financial condition and results of operations.

Our operations, and the operations of certain of our co-packers and other supplies, are subject to extensive regulation by the Food and Drug Administration (“FDA”), the United States Department of Agriculture (“USDA”), the Federal Trade Commission (“FTC”) and various other federal, state, local and foreign authorities where our products are produced or sold. We and our co-packers are also subject to U.S. laws affecting operations outside of the United States, including anti-bribery laws, such as the Foreign Corrupt Practices Act (“FCPA”), and state laws, such as the California Safe Drinking Water and Toxic Enforcement Act of 1986 (better known as “Proposition 65”). Failure by us or any of our co-packers or other suppliers to comply with applicable laws and regulations, or allegations of compliance failure, may disrupt operations, expose us to potential fines and cause us to incur costs to ensure compliance.

Any changes in the laws and regulations to which we or our co-packers and other suppliers are subject, or any changes in how existing or future laws or regulations will be enforced, administered or interpreted, could increase the cost of developing, manufacturing and distributing our products or otherwise increase the cost of conducting our business, adversely impact how we are able to market our products, require us to change or reformulate products or expose us to additional risk of liabilities and claims. For example, if FDA or other regulations restrict us from labeling and marketing certain product attributes, such as “net carb” count or “keto,” we may be unable to effectively reach our target consumer for certain of our Birch Benders products or promote what we believe to be the key differentiating attributes for those products. Failure by us or our co-packers and other suppliers to comply with applicable laws and regulations, including future laws and regulations, could subject us to civil remedies, including fines, injunctions, recalls or seizures, as well as potential criminal sanctions, any of which have a material adverse effect on our business, financial condition and results of operations.

Governmental and administrative bodies within the United States are considering a variety of tax, trade and other regulatory reforms, including tariffs on certain materials used in the manufacture of our products and tariffs on certain finished products. We regularly move data across state borders to conduct our operations and, consequently, are subject to a variety of laws and regulations in the United States regarding privacy, data protection and data security, including those related to the collection, storage, handling, use, disclosure, transfer and security of personal data. There is significant uncertainty with respect to compliance with such privacy and data protection laws and regulations because they are continuously evolving and developing and may be interpreted and applied differently from state to state and may create inconsistent or conflicting requirements.

We and our co-packers and other suppliers are subject to various federal, state, local and foreign environmental laws and regulations. Our primary environmental compliance obligations relate to wastewater and solid waste generated by our manufacturing operations and ammonia and freon used in our refrigerant systems, all of which are subject to special handling requirements. In addition, as a current or former operator of real property, we may be liable for the cost to remove or remediate contamination resulting from the presence or release of hazardous substances from or on such property, whether or not we knew of or caused such contamination, and such liability may be joint and several. We also may be liable for costs of remediating contamination at off-site disposal or treatment facilities to which we arranged for the disposal or treatment of hazardous substances, without regard to whether we complied with applicable laws in doing so. Our failure to comply with environmental laws and regulations could subject us to lawsuits, administrative penalties and civil remedies. Due to regulatory complexities, uncertainties inherent in litigation and the risk of unidentified contaminants on our or any of our co-packers’ or other suppliers’ current and former properties, the potential exists for remediation, liability, indemnification and compliance costs to differ from our estimates. We cannot guarantee that our costs in relation to these matters, or compliance with environmental laws in general, will not exceed our established liabilities or otherwise have a material adverse effect on our business, financial condition and results of operations.

Future litigation may lead us to incur significant costs or harm our or our brands’ reputations.

The sale of food products for human consumption involves the risk of injury to consumers. Such injuries may result from mislabeling, tampering or product contamination or spoilage, including the

 

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presence of foreign objects, undeclared allergens, substances, chemicals, other agents or residues introduced during the growing, processing, manufacturing, storage, handling or transportation phases of production. We may become party to various lawsuits and claims arising in the normal course of business, which may include lawsuits or claims relating to product labeling, product recalls and product liability as well as the marketing of our products, intellectual property, contracts, employment matters, environmental matters or other aspects of our business. Even when not merited, the defense of these lawsuits may divert our management’s attention, and we may incur significant expenses in defending these lawsuits. In addition, we may be required to pay damage awards or settlements or become subject to injunctions or other equitable remedies, and such claims or liabilities may not be covered by our insurance or by any rights of indemnity or contribution that we have against others. Although we maintain insurance, including product liability insurance and product contamination insurance, in amounts we believe to be adequate, we cannot assure you that we will not incur claims or liabilities for which we are not insured or that exceed the amount of our insurance coverage. The outcome of litigation is often difficult to predict, and the outcome of future litigation could have a material adverse effect on our business, financial condition and results of operations.

Our cost savings and efficiency initiatives may not be successful, which could have a material adverse effect on our business, financial condition and results of operations.

We are pursuing several cost-saving and efficiency initiatives, such as a trade efficiency project, category bids, supplier and co-packer negotiations, product reformulations, SKU rationalizations, increased automation and other efforts to simplify production and reduce costs. We are also working to leverage our scale as we grow our business, with products in three temperature states at retailers (refrigerated, frozen and shelf-stable), and reduce the amount of products that are sold to customers through distributors and increase our direct engagement with customers through our “go-direct” initiative.

However, certain of our initiatives may lead to increased costs in other aspects of our business, such as increased research and development, conversion, outsourcing or distribution costs, or cause other disruptions to our business. We must accurately predict costs, be efficient in executing any plans to achieve cost savings and operate efficiently in the highly-competitive packaged food industry. To capitalize on our efforts, we must carefully evaluate investments in our business and execute in those areas with the most potential return on investment. If we are unable to realize the anticipated benefits from any cost-saving or efficiency initiatives or if such initiatives disrupt our business, it could have a material adverse effect on our business, financial condition and results of operations.

If we are unable to retain our key management personnel, it could have a material adverse effect on our business, financial condition and results of operations.

Our success depends to a significant degree upon the continued contributions of senior management, certain of whom would be difficult to replace. In particular, our Founder, President and Chief Executive Officer, Todd R. Lachman, is critical to our vision, strategic direction, culture, products and growth. We do not maintain key-man insurance for Mr. Lachman or any other member of our senior management team. We compete with other companies both within and outside of our industry for talented personnel, and we may lose key personnel or fail to attract, train and retain other talented personnel. Any such loss or failure could adversely affect our product sales, financial condition and operating results. The departure of members of our key employees or senior management could have a material adverse effect on our business, financial condition and results of operations.

Fluctuations in our tax obligations and effective tax rate and realization of our deferred tax assets may result in volatility of our results of operations.

We are subject to income taxes in various U.S. jurisdictions. We record tax expense based on our estimates of future payments, which may in the future include reserves for uncertain tax positions in multiple tax jurisdictions, and valuation allowances related to certain net deferred tax assets. At any one time, many tax years may be subject to audit by various taxing jurisdictions. The results of these audits and negotiations with taxing authorities may affect the ultimate settlement of these issues. We expect that throughout the year there could be ongoing variability in our quarterly tax rates as events occur and exposures are evaluated.

 

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In addition, our effective tax rate in a given financial reporting period may be materially impacted by a variety of factors including, but not limited to, changes in the mix and level of earnings, varying tax rates in the different jurisdictions in which we operate, fluctuations in the valuation allowance or by changes to existing accounting rules or regulations. Further, tax legislation may be enacted in the future, including current proposals in Congress to increase corporate taxes. New or revised tax legislation could negatively impact our current or future tax structure and effective tax rates.

A change in the assumptions used to value our goodwill or our intangible assets, or the impairment of our goodwill or our intangible assets, could have a material adverse effect on our business, financial condition and results of operations.

Our total assets include substantial goodwill and intangible assets, such as tradenames and trademarks. Goodwill and indefinite-lived intangible assets are tested for impairment annually and when indicators of impairment exist. The annual goodwill and indefinite-lived intangible impairment test involves a qualitative evaluation and 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 reporting unit or indefinite-lived asset is less than the carrying value, a quantitative test is then performed. Otherwise, no further testing is required. When using a quantitative approach to assess goodwill for impairment, we compare the fair value of the reporting unit to the carrying amount, including goodwill. For indefinite-lived intangible assets, impairment is assessed by comparing the fair value of the asset with its carrying value. In addition, we evaluate definite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If the estimated fair value of the reporting unit or indefinite-lived asset is less than its carrying amount, impairment is indicated, requiring recognition of an impairment charge for the differential. Determining the fair value of a reporting unit or indefinite-lived asset is judgmental in nature and involves the use of significant estimates and assumptions. Factors, such as future adverse changes in market conditions or poor operating results of these underlying assets, could result in losses or an inability to recover the carrying value of the asset that may not be reflected in the asset’s current carrying value, thereby requiring impairment charges in the future. We completed our annual impairment test for fiscal 2020 with no adjustments to the carrying values of goodwill and intangible assets. However, we recorded an impairment loss to Michael Angelo’s goodwill of approximately $14.4 million and an impairment loss to the Michael Angelo’s trade name, a definite-lived intangible asset, of approximately $2.8 million for fiscal 2019. If operating results for any of our other brands, including brands that we have recently acquired or may acquire in the future, deteriorate or fail to meet our projections or expectations, we may be required to record additional non-cash impairment charges to certain intangible assets. In addition, any significant decline in our market capitalization, even if due to macroeconomic factors that could be affected by the COVID-19 pandemic or otherwise, could put pressure on the carrying value of our goodwill. A determination that all or a portion of our goodwill or intangible assets are impaired, although such determination would result in a non-cash charge to operations, could have a material adverse effect on our business, financial condition and results of operations.

If we do not maintain effective internal controls over financial reporting, we may not be able to accurately and timely report our financial results, which could have a material adverse effect on our business, financial condition and results of operations, and investors may lose confidence in the accuracy and completeness of our financial reports and the price of our common stock may decline.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for evaluating and reporting on the effectiveness of our system of internal control. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with GAAP. As a public company, we will be required to comply with the Sarbanes-Oxley Act and other rules that govern public companies. In particular, we will be required to certify our compliance with Sections 302, 404 and 906 of the Sarbanes-Oxley Act, which requires us to furnish annually a report by management on the effectiveness of our internal control over financial reporting. In addition, our independent registered public accounting firm will be required to report on the effectiveness of our internal control over financial reporting in the future to the extent that we are no longer an emerging growth company or smaller reporting company.

 

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If we are unable to successfully remediate any future material weaknesses or other deficiencies in our internal control over financial reporting, the accuracy and timing of our financial reporting may be adversely affected; our liquidity, our access to capital markets, the perceptions of our creditworthiness and our ability to complete acquisitions may be adversely affected; we may be unable to maintain compliance with applicable securities laws, the NASDAQ listing requirements and the covenants under our debt agreements regarding the timely filing of periodic reports; we may be subject to regulatory investigations and penalties; investors may lose confidence in our financial reporting; we may suffer defaults, accelerations or cross-accelerations under our debt agreements to the extent we are unable to obtain waivers from the required creditors or counterparties or are unable to cure any breaches; and our stock price may decline.

We have related party transactions which present possible conflicts of interest.

We have engaged in related party transactions with our directors or related entities. For example, the Bellvue, Colorado facility where we manufacture all of our noosa spoonable yogurts is owned indirectly by Robert L. Graves, our Vice President, Strategic Initiatives and a member of our board of directors (the “Board”), and leased pursuant to a facilities lease agreement and a ground lease agreement that each expire on December 31, 2027 and contain options for extension for a total of 15 additional two-year extensions. In addition, the close proximity of our employees to the employees of Mr. Graves’ manufacturing facility and the interrelatedness of our operations with the operations of Mr. Graves’ manufacturing facility could expose us to risks or influence our business decisions. See “Certain Relationships and Related Party Transactions — Lease Agreements.” In all related party transactions, there is a risk that a related party’s influence may be such that the transaction terms could be viewed as favorable to that related party, even if we strive to ensure that the terms of the transaction are arms-length. The appearance of conflicts of interest created by related party transactions could impair the confidence of our investors.

Failure by us, or the third-party partners on which we rely, to maintain good employee relations could have a material adverse effect on our business, financial condition and results of operations.

We have approximately 615 employees. Although none of our employees are currently covered under collective bargaining agreements, our employees may elect to be represented by labor unions in the future. If a significant number of our employees were to become unionized and collective bargaining agreement terms were significantly different from our current compensation arrangements, it could have a material adverse effect on our business, financial condition and results of operations. In addition, a labor dispute involving some or all our employees could harm our reputation, disrupt our operations and reduce our revenues, and resolution of disputes could increase our costs. Further, we rely on third parties whose employees may be, or may elect to be, represented by labor unions, and such disruptions in their operations could in turn have a material adverse effect on our business, financial condition and results of operations. Failure to maintain good relations with our employees, or the failure of third parties on which we rely to maintain good relations with their employees, could have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Distribution and Manufacturing

We are dependent on third-party distributors.

Third-party distributors purchase our products directly for their own account for resale, and we rely on sales made by or through these third-party distributors to customers. For instance, one of our largest customers, KeHE is also a distributor of our products. The loss of, or business disruption at, one or more of these distributors could have a material adverse effect on our business, financial condition and results of operations. Although we are striving to decrease our reliance on distributors for sales to certain customers as part of our “go-direct” cost-savings initiative, we may not be successful in this initiative, and this initiative may disrupt our relationships with our distributors who we rely on for the portion of our business that is conducted through distributors. If we are required to obtain additional or alternative distribution agreements or arrangements in the future, we cannot be certain that we will be able to do so on satisfactory terms or in a timely manner. Our inability to enter into satisfactory distribution agreements could inhibit our ability to implement our business plan or impact our ability to maintain or successfully expand the distribution of our products, which could have a material adverse effect on our business, financial condition and results of operations.

 

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We rely on third-party co-packers for a significant portion of our manufacturing needs, including one co-packer for the substantial majority of our Rao’s Homemade sauce products. If our co-packers do not accept or fulfill purchase orders from us or we are unable to enter into additional or future co-packing agreements, it could have a material adverse effect on our business, financial condition and results of operations.

We rely upon co-packers for a significant portion of our manufacturing needs. Our success depends, in part, on maintaining a strong sourcing and manufacturing platform. We believe that there are a limited number of high-quality, fiscally stable co-packers in the industry with the equipment and operational capabilities required to make our products, and many of our co-packing agreements do not include purchase or supply minimums. If we were required to obtain additional or alternative co-packing agreements or arrangements in the future, or if co-packers experience capacity issues or disruptions (whether as a result of the COVID-19 pandemic or otherwise), production of our products may be delayed or postponed and/or the availability of some of our products may be reduced or delayed. To meet certain service level minimums for our customers and avoid financial penalties that could result from a failure to meet such minimums under our agreements with customers, we may incur additional expenses, including paying a premium for faster, more expensive transportation methods or agreeing to production premiums with our co-packers.

In addition, we rely on La Regina, a third-party co-packer, for the substantial majority of our Rao’s Homemade sauce products. La Regina currently produces our Rao’s Homemade sauce products in Italy. Any disruption to La Regina’s production or delivery of our Rao’s Homemade sauce products, whether due to the political environment in Italy, COVID-19 pandemic related government restrictions, agricultural disasters or pestilence in Italy, issues with production, events affecting ports in Italy or the United States or otherwise, could have a material adverse effect on our business, financial condition and results of operations. To facilitate La Regina’s establishment of a U.S. production location in Alma, Georgia, we have agreed to provide La Regina with exclusivity for the third-party production of certain of our products once this facility is qualified to begin production. However, because the Alma, Georgia production location will use tomatoes from Italy for the production of our Rao’s Homemade and Rao’s Homestyle sauce products, production in Georgia may still be impacted by events in Italy. We have, from time to time, paid La Regina for our products more quickly than required under our contract and we may make similar or other concessions in the future. La Regina is also expected to be our landlord for a distribution center that we plan to open in Alma, Georgia. La Regina does not currently have manufacturing operations in the United States and may encounter unexpected challenges in opening and operating a production location in Alma, Georgia. Business disruptions related to the COVID-19 pandemic, such as availability of necessary equipment, travel restrictions or employee recruiting challenges, could impact the commencement of manufacturing in Alma, Georgia and the opening of our planned distribution center. In the event of a breach by La Regina, we have a right to purchase the facility in Alma, Georgia at cost, including the underlying real property, fixtures and equipment; however, we may encounter difficulties or delays with the exercise of the right to purchase or with assuming the operations at the Alma, Georgia facility. If our relationship with La Regina deteriorates, or if La Regina experiences financial, operational or other issues, we would be required to make alternative arrangements to produce Rao’s Homemade sauce products, such as assuming manufacturing operations on our own, developing our own internal manufacturing capabilities or finding one or more alternative co-packing arrangements, which may be costly or time-consuming to complete. If such an event were to occur, and we were unable to find alternative arrangements in a timely manner or on satisfactory terms, it could have a material adverse effect on our business, financial condition and results of operations.

A significant portion of our products are sourced from a single manufacturing site, which means disruption in, or capacity constraints affecting, our or our co-packers’ operations for any number of reasons could have a material adverse effect on our business, financial condition and results of operations.

Our products are manufactured at several different manufacturing facilities, including our two manufacturing facilities and manufacturing facilities operated by our co-packers, but in most cases, individual products are produced only at a single location. We produce all noosa spoonable yogurts at our Bellvue, Colorado manufacturing facility and all Rao’s Made for Home and Michael Angelo’s frozen products at our Austin, Texas manufacturing facility. We may leverage a co-packer from time to time to supplement our in-house production of select Michael Angelo’s products. The substantial majority of our Rao’s Homemade sauce products are produced at a single La Regina facility in Italy, the majority of our Rao’s Made for Home soup products are produced at a single location in Canada, the majority of our Birch Benders frozen

 

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waffles are produced at a single location in Belgium and our noosa smoothies are co-packed at a single facility. If any of these manufacturing locations experiences a disruption for any reason, including but not limited to work stoppages, governmental actions, disease outbreaks or pandemics, acts of war, terrorism, power failure or weather-related condition or natural disaster, including fire, earthquake, extreme temperatures, volcanic eruption or flooding, or issues associated with efforts to increase manufacturing capacity or improve manufacturing efficiency, this could result in a significant reduction or elimination of the availability of some of our products. If we were not able to obtain alternate production capability in a timely manner or on satisfactory terms, this disruption could have a material adverse effect on our business, financial condition and results of operations.

We rely on third-party warehouse and transportation providers in the distribution of our products.

Our success depends, in part, on dependable and cost-effective storage and transportation systems and a strong distribution network. We utilize third-party warehouse and transportation providers for these services, and the costs of these services could increase due to factors outside of our control. For example, factors associated with the COVID-19 pandemic have resulted in increased demand for transportation, and due to the frozen or refrigerated transportation required for distribution of a COVID-19 vaccine, the cost of transportation for our products could be further impacted. Third-party warehouse and transportation providers are also subject to numerous cost pressures, including costs associated with fuel and labor, and may seek to pass these increased costs on to us.

In addition, a disruption in storage or transportation services could be caused by a number of factors, including labor issues; failure to meet customer standards; acts of war; terrorism; fire, earthquakes, extreme temperatures, volcanic eruption, flooding or other natural disasters; or bankruptcy or other financial issues affecting the third-party providers of such services, and could result in an inability to supply materials to our or our co-packers’ facilities or finished products to our distribution centers or customers. Any disruption in the distribution chain of our products or an increase in the cost of these services could have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Information Technology and Intellectual Property

We are increasingly dependent on information technology; disruptions, failures or security breaches of our information technology infrastructure or failure to comply with privacy laws could have a material adverse effect on our business, financial condition and results of operations.

Information technology is critically important to our business operations. We rely on information technology networks and systems, including the internet, to process, transmit and store electronic and financial information, manage a variety of business processes and activities (including our manufacturing, financial, logistics, sales, marketing and administrative functions), communicate internally and externally with customers, suppliers, carriers and others and comply with regulatory, legal and tax requirements. We also use mobile devices, social networking and other online activities to connect with our employees, suppliers, customers and consumers, and we have become more reliant on mobile devices, remote communication and other technologies during the COVID-19 pandemic. These information technology systems, many of which are managed by third parties or used in connection with shared service centers, may be susceptible to damage, disruptions or shutdowns due to factors outside of our control, including failures during the process of upgrading or replacing software, databases or components thereof, maintenance or security issues or errors, issues with migration of applications to the “cloud,” power outages, hardware or software failures, cyberattacks and other cyber incidents, telecommunication failures, denial of service, user errors, natural disasters, terrorist attacks or other catastrophic events.

Cyberattacks and other cyber incidents are occurring more frequently in the United States, constantly evolving in nature, becoming more sophisticated and being made by various groups and individuals with a wide range of expertise and motives. The decentralized nature of our operations and our increased reliance on our information technology systems due to many employees working remotely during, and potentially following, the COVID-19 pandemic could increase our vulnerability to cyberattacks and other cyber incidents. We may incur significant costs in protecting against or remediating cyberattacks or other cyber incidents.

 

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In addition, if our suppliers or customers experience a breach or system failure, their businesses could be disrupted or otherwise negatively affected, which could in turn result in a disruption in our supply chain or reduced customer orders. If our information technology networks and systems suffer severe damage, disruption or shutdown, and our disaster recovery and business continuity plans, or those of our third-party providers, suppliers or customers, do not effectively respond to or resolve the issues in a timely manner, it could have a material adverse effect on our business, financial condition and results of operations.

Further, if we are unable to prevent physical and electronic break-ins, cyberattacks and other information security breaches, we may suffer financial and reputational damage, be subject to litigation or incur remediation costs or penalties as a result of unauthorized disclosure of confidential information belonging to us or to our partners, customers, suppliers, employees or consumers. The mishandling or inappropriate disclosure of non-public sensitive or protected information could lead to the loss of intellectual property, negatively impact planned corporate transactions or damage our reputation and brand image. Misuse, leakage or falsification of legally protected information could also result in a violation of data privacy laws and regulations and have a material adverse effect on our business, financial condition and results of operations.

Our intellectual property rights are valuable. Failure to protect, or litigation involving, our tradenames or trademarks and other rights could have a material adverse effect on our business, financial condition and results of operations.

Our intellectual property rights, including our trademarks, are a significant and valuable aspect of our business. We attempt to protect our intellectual property rights by pursuing remedies available to us under intellectual property laws, entering into third-party nondisclosure and assignment agreements and policing third-party misuses of our intellectual property. If we fail to adequately protect the intellectual property rights that we have now or may acquire in the future, or if there is any change in law or otherwise that serves to reduce or remove the current legal protections of our intellectual property rights, it could have a material adverse effect on our business, financial condition and results of operations. Further, although we own rights to “Rao’s” trademarks for our packaged food products, a third party owns rights to “Rao’s” trademarks for restaurant services and bar services. We have a co-existence agreement with this third party. See “Business — Intellectual Property.”

There is also a risk that other parties may have or claim to have intellectual property rights covering some of our brands, products or technology. If any third parties bring a claim of intellectual property infringement against us, we may be subject to costly and time-consuming litigation which could divert the attention of management and our employees. If we are unsuccessful in defending against such claims, we may be subject to, among other things, significant damages and injunctions against development and sale of certain products, we may be unable to utilize certain of our brand or product names or we may be required to enter into costly licensing agreements, any of which could have a material adverse effect on our business, financial condition and results of operations.

A third party owns the “Rao’s” trademarks for use in connection with restaurant and bar services. Disputes regarding our co-existence agreement with this third party or negative publicity relating to the Rao’s restaurants could have a material adverse effect on our business, financial condition and results of operations.

We are party to a worldwide co-existence agreement relating to our and an unrelated third-party’s respective rights to use and register trademarks containing the term “Rao’s.” As between the parties, we own the right to use and register “Rao’s” trademarks for packaged food products, while the third party owns the right to use and register “Rao’s” trademarks for restaurant services and bar services. See “Business — Intellectual Property.” We believe that the “Rao’s” trademarks have significant value and are instrumental in our ability to market and sustain demand for our Rao’s product offerings. Any disputes concerning this co-existence agreement may cause us to incur significant litigation costs. In addition, any negative publicity, social media or other information relating to the restaurants bearing the “Rao’s” trademark, or their owners or employees, could harm consumer perceptions of our Rao’s sauces and other products. Any such disputes or negative information could have a material adverse effect on our business, financial condition and results of operations.

 

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We may experience difficulties fully implementing and integrating our ERP system, including with respect to acquired businesses.

We are in the process of transitioning the Birch Benders business from its current legacy ERP system to our ERP system and, as part of this transition, are adding new capabilities to our ERP system. This transition has required, and will continue to require, the investment of significant financial and human resources. We have experienced ERP delays and complications as a result of the remote work environment necessitated by the COVID-19 pandemic, and we may not be able to complete the integration and full transition to our ERP system without experiencing additional difficulties. This transition involves greater utilization of third-party “cloud” computing services in connection with our business operations. Problems faced by us or our third-party “cloud” computing providers, including technological or business-related disruptions, as well as cybersecurity threats, could have a material adverse effect on our business, financial condition and results of operations. Any disruptions, delays or deficiencies in the design or implementation of the transition of the Birch Benders business to our ERP system could adversely affect our ability to produce products, order products from co-packers, process customer orders, ship products, provide services and customer support, send invoices and track payments, fulfill contractual obligations, achieve integration synergies or otherwise operate our business and could adversely affect our internal controls. It is also possible that the transition of the Birch Benders business to our ERP system could adversely affect our internal controls if errors are made in the transition. If we are unable to transition the Birch Benders business to our ERP system smoothly or successfully, or if we otherwise do not capture anticipated benefits of the transition, it could have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Our Indebtedness

Any default under our debt agreements could have significant consequences.

Each Credit Agreement (as defined herein) contains covenants imposing certain restrictions on our business. These restrictions may affect our ability to operate our business and may limit our ability to take advantage of potential business opportunities as they arise. Each Credit Agreement contains restrictive covenants including, with specified exceptions, limitations on our ability to incur debt and liens; make certain investments, acquisitions and loans; pay dividends or make other distributions; make payments on subordinated debt; enter into burdensome agreements or affiliate transactions; consolidate, merge or dissolve; acquire or dispose of assets not in the ordinary course; materially alter our business; and modify our fiscal year-end. The First Lien Credit Agreement (as defined herein) also contains a springing financial covenant that, if outstanding revolving loans (excluding any undrawn letters of credit) minus unrestricted cash exceed 35% of the aggregate revolving credit commitments, requires us to maintain, on a consolidated basis, a maximum ratio of consolidated first lien net debt to consolidated EBITDA (with certain adjustments as set forth in the First Lien Credit Agreement) of 6.95:1.00, tested as of the last day of any fiscal quarter on which such 35% threshold is exceeded.

Our ability to comply with these covenants under each Credit Agreement may be affected by events beyond our control, including prevailing economic, financial and industry conditions. The breach of any of these covenants could result in an event of default, which would permit the relevant administrative agent or the specified threshold of lenders under each facility to declare all outstanding debt to be due and payable, together with accrued and unpaid interest. Further, the First Lien Credit Agreement contains cross-default provisions with respect to indebtedness in excess of a specified threshold amount, and the Second Lien Credit Agreement includes cross-acceleration provisions with respect to first lien indebtedness in excess of a specified threshold amount, in either case, which may result in an event of default or acceleration of borrowings under such Credit Agreement if such provisions are triggered. Our obligations under (i) the First Lien Credit Agreement are secured by a first priority lien on substantially all of our assets and (ii) the Second Lien Credit Agreement (as defined herein) are secured by a second priority lien on substantially all of our assets, subject to agreed upon exceptions. Any default by us under either Credit Agreement could have a material adverse effect on our business, financial condition and results of operations.

 

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We may be adversely impacted by the potential discontinuation of the London Interbank Offered Rate (“LIBOR”).

We have loans under our Credit Facilities that use LIBOR as a reference rate. The financial authority that regulates LIBOR has announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2023. It is unclear precisely how any alternative reference rates would be calculated and published or whether alternative reference rates will gain market acceptance as a replacement for LIBOR The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is considering replacing U.S.dollar LIBOR with a new index calculated by short-term repurchase agreements, backed by Treasury securities. Any transition from LIBOR may cause us to incur increased costs and additional risk. In connection with the LIBOR discontinuation, some or all of the loans under our Credit Agreements may use alternate base rate as a reference rate. If LIBOR is discontinued, interest rates will generally be based on an alternative variable rate as determined between the applicable Administrative Agent (as defined herein) and the Borrower (as defined herein). The alternative variable rate could be higher and more volatile than LIBOR prior to its discontinuance. At this time, due to a lack of consensus as to what rate or rates may become accepted alternatives to LIBOR, it is impossible to predict the effect of any such alternatives on our liquidity, our interest expense or the value of the loans under our Credit Facilities.

Our level of indebtedness could have a material adverse effect on our business, financial condition and results of operations.

The total principal amount of debt outstanding under our Credit Facilities, excluding unamortized debt issuance costs, as of June 26, 2021 was $780.0 million. Our indebtedness could have significant effects on our business, such as:

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limiting our ability to borrow additional amounts to fund acquisitions, debt service requirements, execution of our growth strategy, capital expenditures and other purposes;

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limiting our ability to make investments, including acquisitions, loans and advances, and to sell, transfer or otherwise dispose of assets;

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requiring us to dedicate a substantial portion of our cash flow from operations to pay principal and interest on our borrowings, which would reduce availability of our cash flow to fund working capital, acquisitions, execution of our growth strategy, capital expenditures and other general corporate purposes;

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making us more vulnerable to adverse changes in general economic, industry and competitive conditions, in government regulation and in our business by limiting our ability to plan for and react to changing conditions;

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placing us at a competitive disadvantage compared with our competitors that have less debt; and

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exposing us to risks inherent in interest rate fluctuations because our borrowings are at variable rates of interest, which could result in higher interest expense in the event of increases in interest rates.

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In addition, we may not be able to generate sufficient cash flow from our operations to repay our indebtedness when it becomes due and to meet our other cash needs. If we are not able to pay our borrowings as they become due, we will be required to pursue one or more alternative strategies, such as selling assets, refinancing or restructuring our indebtedness or selling additional debt or equity securities. We may not be able to refinance our debt or sell additional debt or equity securities or our assets on favorable terms, if at all, and if we must sell our assets, it could have a material adverse effect on our business, financial condition and results of operation.

Pursuant to our First Lien Credit Agreement, if outstanding revolving loans (excluding any undrawn letters of credit) minus unrestricted cash exceed 35% of the aggregate revolving credit commitments, we are required to maintain, on a consolidated basis, a maximum ratio of consolidated first lien net debt to consolidated EBITDA (with certain adjustments as set forth in the First Lien Credit Agreement) of 6.95:1.00, tested as of the last day of any fiscal quarter on which such 35% threshold is exceeded. Events beyond our control, including changes in general economic and business conditions, may affect our ability to satisfy the

 

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financial covenant. We cannot assure you that we will satisfy the financial covenant in the future, or that our lenders will waive any failure to satisfy the financial covenant.

The failure to comply with the covenants under each Credit Agreement or volatility in the credit and capital markets could have a material adverse effect on our business, financial condition and results of operation.

Our ability to manage our debt is dependent on our level of positive cash flow from the sale of our products. An economic downturn may negatively impact our cash flows. Credit and capital markets can be volatile, which could make it more difficult for us to refinance our existing debt or to obtain additional debt or equity financings in the future. Such constraints could increase our costs of borrowing and could restrict our access to other potential sources of future liquidity. Future volatility or disruption in the credit and capital markets could require us to take measures to conserve cash until the markets stabilize or until alternative credit arrangements or other funding for our business needs can be arranged. Our failure to comply with the covenants under each Credit Agreement or to have sufficient liquidity to make interest and other payments required by our debt could result in a default of such debt and acceleration of our borrowings, which could have a material adverse effect on our business, financial condition and results of operations.

Risks Related to this Offering and Ownership of Our Common Stock

Future offerings of debt or equity securities by us may have a material adverse effect on the market price of our common stock.

In the future, we may attempt to obtain financing or to further increase our capital resources by issuing additional shares of our common stock or by offering debt or other equity securities, including senior or subordinated notes, debt securities convertible into equity or shares of preferred stock.

Any future debt financing could involve restrictive covenants relating to our capital-raising activities and other financial and operational matters, which might make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. Moreover, if we issue debt securities, the debt holders would have rights to make claims on our assets senior to the rights of our holders of our common stock. The issuance of additional shares of our common stock or other equity securities or securities convertible into equity may dilute the economic and voting rights of our existing stockholders or reduce the market price of our common stock or both. Debt securities convertible into equity could be subject to adjustments in the conversion ratio pursuant to which certain events may increase the number of equity securities issuable upon conversion. Preferred shares, if issued, could have a preference with respect to liquidating distributions or a preference with respect to dividend payments that could limit our ability to pay dividends to the holders of our common stock. Our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, which may have a material adverse effect on the amount, timing, or nature of our future offerings. Thus, holders of our common stock bear the risk that our future offerings may reduce the market price of our common stock and dilute their stockholdings in us.

If the ownership of our common stock continues to be highly concentrated, it may prevent you and other minority stockholders from influencing significant corporate decisions and may result in conflicts of interest.

Following the closing of this offering, Advent will indirectly beneficially own approximately 64% our outstanding common stock, or 62% if the underwriters’ option to purchase additional shares is fully exercised. As a result, Advent will indirectly beneficially own shares sufficient for majority votes over all matters requiring stockholder votes, including the election of directors; mergers, consolidations and acquisitions; the sale of all or substantially all of our assets and other decisions affecting our capital structure; amendments to our certificate of incorporation or our bylaws; and our winding up and dissolution.

This concentration of ownership may delay, deter or prevent acts that would be favored by our other stockholders. The interests of Advent may not always coincide with our interests or the interests of our other stockholders. This concentration of ownership may also have the effect of delaying, preventing or deterring a change in control of us. Also, Advent may seek to cause us to take courses of action that, in its judgment, could enhance its investment in us, but which might involve risks to our other stockholders or adversely affect us or our other stockholders, including investors in this offering. As a result, the market

 

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price of our common stock could decline or stockholders might not receive a premium over the then-current market price of our common stock upon a change in control. In addition, this concentration of share ownership may adversely affect the trading price of our common stock because investors may perceive disadvantages in owning shares in a company with significant stockholders. See “Principal Stockholders” and “Description of Capital Stock — Anti-takeover Provisions.”

As a controlled company, we will not be subject to all of the corporate governance rules of NASDAQ.

Upon the listing of our common stock on NASDAQ in connection with this offering, we will be considered a “controlled company” under the rules of NASDAQ. Controlled companies are exempt from the NASDAQ corporate governance rules requiring that listed companies have (i) a majority of the board of directors consist of “independent” directors under the listing standards of NASDAQ, (ii) a nominating/​corporate governance committee composed entirely of independent directors and a written nominating/​corporate governance committee charter meeting the NASDAQ requirements and (iii) a compensation committee composed entirely of independent directors and a written compensation committee charter meeting the requirements of NASDAQ. Following this offering, although we are eligible to use some or all these exemptions, we expect that our Board will be comprised of a majority of independent directors, our nominating and corporate governance committee and compensation committee will consist entirely of independent directors and such committees will conduct annual performance evaluations. However, if we are to use some or all of these exemptions in the future, you may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of NASDAQ. See “Management — Director Independence and Controlled Company Exemption.”

We do not anticipate paying any dividends on our common stock in the foreseeable future.

We do not currently intend to pay any dividends on our common stock, and our Credit Facilities limit our ability to pay dividends on our common stock. We may also enter into other credit agreements or other borrowing arrangements in the future that restrict or limit our ability to pay dividends on our common stock. As a result, you may not receive any return on an investment in our common stock unless you sell our common stock for a price greater than that which you paid for it. See “Dividend Policy.”

Our quarterly results of operations may fluctuate significantly and could fall below the expectations of securities analysts and investors due to seasonality and other factors, some of which are beyond our control, resulting in a decline in our stock price.

Our quarterly results of operations may fluctuate due to seasonal or other factors. Accordingly, results for any one quarter are not necessarily indicative of results to be expected for any other quarter or for any year. In addition, if we increase our marketing or promotional activity in certain periods, the seasonality of our business may be amplified. In the future, results of operations may fall below the expectations of securities analysts and investors. In that event, the price of our common stock could be adversely impacted.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of us, the trading price for our common stock would be negatively impacted. If we obtain securities or industry analyst coverage and if one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. Moreover, if our results of operations do not meet the expectations of the investor community, or one or more of the analysts who cover our company downgrade our stock, our stock price could decline. As a result, you may not be able to sell shares of our common stock at prices equal to or greater than the initial public offering price.

No market currently exists for our common stock, and we cannot assure you that an active market will develop for such stock.

Prior to this offering, there has been no public market for our common stock. The initial public offering price for our common stock has been determined through negotiations among us and the

 

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representatives of the underwriters and may not be indicative of the market price of our common stock after this offering or to any other established criteria of the value of our business. If you purchase shares of our common stock, you may not be able to resell those shares at or above the initial public offering price. We cannot predict the extent to which investor interest in us will lead to the development of an active trading market on NASDAQ or otherwise or how liquid that market might become. An active public market for our common stock may not develop or be sustained after this offering. If an active public market does not develop or is not sustained, it may be difficult for you to sell your shares of common stock at a price that is attractive to you or at all.

The market price and trading volume of our common stock may be volatile, which could result in rapid and substantial losses for our stockholders, and you may lose all or part of your investment.

Shares of our common stock sold in this offering may experience significant volatility on NASDAQ. An active, liquid and orderly market for our common stock may not be sustained, which could depress the trading price of our common stock or cause it to be highly volatile or subject to wide fluctuations. The market price of our common stock may fluctuate or may decline significantly in the future and you could lose all or part of your investment. Some of the factors that could negatively affect our share price or result in fluctuations in the price or trading volume of our common stock include:

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variations in our quarterly or annual results of operations;

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changes in our earnings estimates (if provided) or differences between our actual results of operations and those expected by investors and analysts;

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the contents of published research reports about us or our industry or the failure of securities analysts to cover our common stock;

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additions or departures of key management personnel;

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any increased indebtedness we may incur in the future;

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announcements by us or others and developments affecting us;

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actions by institutional stockholders;

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litigation and governmental investigations;

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•

legislative or regulatory changes;

​

•

judicial pronouncements interpreting laws and regulations;

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•

changes in government programs;

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•

changes in market valuations of similar companies;

​

•

speculation or reports by the press or investment community with respect to us or our industry in general;

​

•

announcements by us or our competitors of significant contracts, acquisitions, dispositions, strategic relationships, joint ventures or capital commitments; and

​

•

general market, political and economic conditions, including local conditions in the markets in which we operate.

​

These broad market and industry factors may decrease the market price of our common stock, regardless of our actual financial performance. The stock market in general has from time to time experienced extreme price and volume fluctuations, including recently. In addition, in the past, following periods of volatility in the overall market and decreases in the market price of a company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources, which could have a material adverse effect on our business, financial condition and results of operations.

The market price of our common stock could be negatively affected by sales of substantial amounts of our common stock in the public markets.

After this offering, we will have 97,392,447 shares of common stock outstanding. Of our issued and outstanding shares, all the common stock sold in this offering will be freely transferable, except for any

 

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shares purchased by our “affiliates,” as that term is defined in Rule 144 under the Securities Act, and any shares purchased by our directors, officers or vice presidents in our reserved share program. Following closing of this offering, approximately 64% of our outstanding common stock, or 62% if the underwriters exercise their option to purchase additional shares in full, will be indirectly beneficially owned by Advent, and can be resold into the public markets in the future in accordance with the requirements of Rule 144. See “Shares Eligible For Future Sale.”

We and our officers, directors and holders of substantially all of our outstanding capital stock and other securities have agreed, subject to specified exceptions, not to directly or indirectly:

•

offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of any shares of our common stock or any securities convertible into or exercisable or exchangeable for any shares of our common stock;

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•

enter into any swap or other agreement or transaction that transfers, in whole or in part, any of the economic consequences of ownership of any shares of common stock or any such other securities; or

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•

publicly disclose an intention to do any of the foregoing

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for a period of 180 days after the date of this prospectus without the prior written consent of the representatives of the underwriters.

This restriction terminates after the close of trading of the common stock on and including the 180th day after the date of this prospectus. The representatives of the underwriters may, in their sole discretion and at any time or from time to time before the termination of the 180-day period, release all or any portion of the securities subject to lock-up agreements. See “Underwriting.”

The market price of our common stock may decline significantly when the restrictions on resale by our existing stockholders lapse. A decline in the price of our common stock might impede our ability to raise capital through the issuance of additional common stock or other equity securities.

The future issuance of additional common stock in connection with any equity plans, acquisitions or otherwise will dilute all other stockholdings.

After this offering, we will have an aggregate of 392,868,309 shares of common stock authorized but unissued and not reserved for issuance under our equity incentive plans. We may issue all these shares of common stock without any action or approval by our stockholders, subject to certain exceptions. The issuance of any common stock in connection with any equity incentive plan, the exercise of outstanding stock options or otherwise would dilute the percentage ownership held by the investors who purchase common stock in this offering.

You will incur immediate dilution as a result of this offering.

If you purchase common stock in this offering, you will pay more for your shares than the amounts paid by existing stockholders for their shares. As a result, you will incur immediate dilution of $18.90 per share, representing the difference between the assumed initial public offering price of $15.00 per share (the midpoint of the estimated initial public offering price range set forth on the cover of this prospectus) and our pro forma net tangible book value (deficit) per share after giving effect to this offering. See “Dilution.”

Risks Related to Our Company and Organizational Structure

The interests of Advent may conflict with our interests or the interests of the holders of our common stock in the future.

Advent engages in a range of investing activities, including investments in consumer products companies and other consumer-related companies in particular. In the ordinary course of its business activities, Advent may engage in activities where its interests conflict with our interests or those of our stockholders. Our certificate of incorporation will contain provisions renouncing any interest or expectancy held by our directors affiliated with Advent in certain corporate opportunities. Accordingly, the interests of Advent may

 

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supersede ours, causing them or their affiliates to compete against us or to pursue opportunities instead of us, for which we have no recourse. Such actions on the part of Advent and inaction on our part could have a material adverse effect on our business, financial condition and results of operations. In addition, Advent may have an interest in pursuing acquisitions, divestitures and other transactions that, in its judgment, could enhance its investment in us, even though such transactions might involve risks to you, such as debt-financed acquisitions.

With certain exceptions, Advent and its affiliates, including certain of our directors who are affiliated with Advent, will not have any obligation to present business opportunities to us and may compete with us.

Our certificate of incorporation will provide that Advent and its affiliates, including certain of our directors who are affiliated with Advent, do not have any obligation to offer us an opportunity to participate in business opportunities presented to them even if the opportunity is one that we might reasonably have pursued (and therefore may be free to compete with us in the same business or similar businesses) and that, to the extent permitted by law, such directors, Advent and its affiliates, will not be liable to us or our stockholders for breach of any duty by reason of any such activities.

As a result, Advent and its affiliates, including certain of our directors who are affiliated with Advent, will not be prohibited from investing in competing businesses or doing business with our customers. Therefore, we may be in competition with Advent or certain of our directors or their respective affiliates, and we may not have knowledge of, or be able to pursue, transactions that could potentially be beneficial to us. Accordingly, we may lose certain corporate opportunities or suffer competitive harm, which could have a material adverse effect on our business, financial condition and results of operations.

We are a holding company with no operations and rely on our operating subsidiaries to provide us with funds necessary to meet our financial obligations and to pay dividends, if any.

We are a holding company with no material direct operations. Our principal assets are the equity interests we hold in our operating subsidiaries which own our operating assets. As a result, we are dependent on loans, dividends and other payments from our operating subsidiaries to generate the funds necessary to meet our financial obligations and to pay dividends, if any, on our common stock. Our subsidiaries are legally distinct from us and may be prohibited or restricted from paying dividends, including by the restrictions contained in our Credit Facilities, or otherwise making funds available to us under certain conditions. Although we do not expect to pay dividends on our common stock for the foreseeable future, if we are unable to obtain funds from our subsidiaries, we may be unable to pay dividends.

As a public company, we incur significant costs to comply with the laws and regulations affecting public companies, which could harm our business and results of operations.

As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and the listing requirements of NASDAQ, and other applicable securities rules and regulations. These rules and regulations have increased and will continue to increase our legal, accounting and financial compliance costs and have made and will continue to make some activities more time-consuming and costly, particularly after we cease to be an emerging growth company as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. For example, these rules and regulations could make it more difficult and more costly for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or to incur substantial costs to maintain the same or similar coverage. These rules and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our Board or our board committees or as executive officers. Our management and other personnel will devote a substantial amount of time to these compliance initiatives. As a result, management’s attention may be diverted from other business concerns, which could harm our business, financial condition and results of operations. We will need to hire more employees in the future to comply with these requirements, which will increase our costs and expenses.

Our management team and other personnel devote a substantial amount of time to new compliance initiatives, and we may not successfully or efficiently manage our transition to a public company. To comply with the requirements of being a public company, including the Sarbanes-Oxley Act, we will need to undertake various actions, such as implementing new internal controls and procedures and hiring accounting

 

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or internal audit staff or outsourcing certain functions to third parties, which could have a material adverse effect on our business, financial condition and results of operations.

Our current resources may not be sufficient to fulfill our public company obligations.

Following the closing of this offering, we will be subject to various regulatory requirements, including those of the SEC and NASDAQ. These requirements include record keeping, financial reporting and corporate governance rules and regulations. Historically, our management team has not had the resources typically found in a public company. Our internal infrastructure may not be adequate to support our increased reporting obligations and we may be unable to hire, train or retain necessary staff and may be reliant on engaging outside consultants or professionals to overcome our lack of experience or employees. If our internal infrastructure is inadequate, we are unable to engage outside consultants at a reasonable rate or attract talented employees to perform these functions or are otherwise unable to fulfill our public company obligations, it could have a material adverse effect on our business, financial condition and results of operations.

For as long as we are an emerging growth company, we will not be required to comply with certain reporting requirements, including those relating to accounting standards and disclosure about our executive compensation, that apply to other public companies.

We are an emerging growth company, as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and of stockholder approval of any golden parachute payments not previously approved. We may take advantage of some of these exemptions. If we do, we do not know if some investors will find our common stock less attractive as a result. The result may be a less-active trading market for our common stock and our stock price may be more volatile.

In addition, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

We could remain an emerging growth company for up to five years or until the earliest of (a) the last day of the first fiscal year in which our annual gross revenues exceed $1.07 billion, (b) the date that we become a large accelerated filer as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (c) the date on which we have issued more than $1 billion in non-convertible debt securities in the preceding three-year period.

Delaware law and our organizational documents, as well as our existing and future debt agreements, may impede or discourage a takeover, which could deprive our investors of the opportunity to receive a premium for their shares.

We are a Delaware corporation, and the anti-takeover provisions of Delaware law impose various impediments to the ability of a third party to acquire control of us, even if a change of control would be beneficial to our existing stockholders. In addition, provisions of our certificate of incorporation and bylaws that will be effective upon closing of this offering may make it more difficult for, or prevent a third party from, acquiring control of us without the approval of our Board. Among other things, these provisions:

•

provide for a classified Board with staggered three-year terms until the first annual meeting of stockholders following the Sunset (as defined herein), which will prevent a third party who acquires control of a majority of our outstanding voting stock from obtaining control of our Board until the second annual stockholders meeting following the date the acquiror obtains the controlling interest;

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•

do not permit cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to elect director candidates;

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•

delegate the sole power of a majority of the Board to fix the number of directors;

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•

provide the power of our Board to fill any vacancy on our Board, whether such vacancy occurs as a result of an increase in the number of directors or otherwise;

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•

authorize the issuance of preferred stock without any need for action by stockholders;

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•

do not permit stockholders to call special meetings of stockholders; and

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•

establish advance notice requirements for nominations for election to our Board or for proposing matters that can be acted on by stockholders at stockholder meetings.

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In addition, our Credit Facilities impose, and we anticipate that documents governing our future indebtedness may impose, limitations on our ability to enter into change of control transactions. The occurrence of a change of control transaction could constitute an event of default thereunder permitting acceleration of the indebtedness, thereby impeding our ability to enter into certain transactions.

The foregoing factors, as well as the significant common stock ownership by Advent, could impede a merger, takeover or other business combination, or discourage a potential investor from making a tender offer for our common stock, which, under certain circumstances, could reduce the market value of our common stock. See “Description of Capital Stock.”

Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.

Our amended and restated certificate of incorporation and bylaws that will be in effect prior to the completion of this offering provide that we will indemnify our directors and officers, in each case, to the fullest extent permitted by Delaware law. Pursuant to our amended and restated certificate of incorporation, our directors will not be liable to us or any stockholders for monetary damages for any breach of fiduciary duty, except (i) for acts that breach his or her duty of loyalty to us or our stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law, (iii) pursuant to Section 174 of the Delaware General Corporate Law (the “DGCL”), which provides for liability of directors for unlawful payments of dividends of unlawful stock purchase or redemptions, or (iv) for any transaction from which the director derived an improper personal benefit. The bylaws also require us, if so requested, to advance expenses that such director or officer incurred in defending or investigating a threatened or pending action, suit or proceeding, provided that such person will return any such advance if it is ultimately determined that such person is not entitled to indemnification by us. Any claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.

Our amended and restated certificate of incorporation will designate the Court of Chancery of the State of Delaware and the federal district courts of the United States of America as the sole and exclusive forums for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.

Our amended and restated certificate of incorporation will provide that, subject to certain exceptions, unless we consent in writing in advance to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for any (i) derivative action or proceeding brought on our behalf, (ii) action asserting a claim of breach of a fiduciary duty or other wrongdoing by any current or former director, officer, employee, agent or stockholder to us or our stockholders, (iii) action asserting a claim arising pursuant to any provision of the DGCL, our amended and restated certificate of incorporation or our amended and restated bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware or (iv) action asserting a claim governed by the internal affairs doctrine of the law of the State of Delaware. For the avoidance of doubt, our amended and restated certificate of incorporation will also provide that the foregoing exclusive forum provision will not apply to actions

 

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brought to enforce any liability or duty created by the Securities Act or the Exchange Act, or any other claim or cause of action for which the federal courts have exclusive jurisdiction.

Our amended and restated certificate of incorporation will also provide that, unless we consent in writing to an alternative forum, the federal district courts of the United States of America shall be the sole and exclusive forum for the resolution of any action asserting a claim arising under the Securities Act or the rules and regulations promulgated thereunder. Pursuant to the Exchange Act, claims arising thereunder must be brought in federal district courts of the United States of America.

This choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring an action in a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to assert the validity and enforceability of our exclusive forum provisions, which may require significant additional costs associated with resolving such action in other jurisdictions, and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions. If a court were to find either exclusive forum provision in amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with resolving the dispute in other jurisdictions, all of which could seriously harm our business.

Our ability to issue preferred stock may deter takeover attempts.

Our Board is empowered to issue, without stockholder approval, preferred stock with dividends, liquidation, conversion, voting or other rights, which could decrease the amount of earnings and assets available for distribution to holders of our common stock and adversely affect the relative voting power or other rights of the holders of our common stock. In the event of issuance, the preferred stock could be used as a method of discouraging, delaying or preventing a change in control. Our certificate of incorporation authorizes the issuance of up to 10,000,000 shares of “blank check” preferred stock with such designations, rights and preferences as may be determined from time to time by our Board. Although we have no present intention to issue any shares of our preferred stock, we may do so in the future under appropriate circumstances.

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements. Forward-looking statements can be identified by words, such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects” and similar references to future periods, or by the inclusion of forecasts or projections. Examples of forward-looking statements include, but are not limited to, statements we make regarding the outlook for our future business and financial performance, such as those contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, our actual results may differ materially from those contemplated by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include regional, national or global political, economic, business, competitive, market and regulatory conditions and the following:

•

competition in the packaged food industry and our product categories;

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•

the COVID-19 pandemic and associated effects;

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•

our inability to identify, consummate or integrate new acquisitions or realize the projected benefits of acquisitions;

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•

our inability to effectively manage our growth;

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•

our inability to successfully introduce new products or failure of recently launched products to meet expectations or remain on-shelf;

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•

our inability to expand household penetration and successfully market our products;

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•

erosion of the reputation of one or more of our brands;

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•

issues with the major retailers, wholesalers, distributors and mass merchants on which we rely, including if they give higher priority to other brands or products, perform poorly or declare bankruptcy;

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•

our vulnerability to decreases in the supply of and increases in the price of raw materials and labor, manufacturing, distribution and other costs, and our inability to offset increasing costs through cost savings initiatives or pricing;

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•

our vulnerability to the impact of severe weather conditions, natural disasters and other natural events on our manufacturing facilities, co-packers or raw material supplies;

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•

failure by us or third-party co-packers or suppliers of raw materials to comply with food safety, environmental or other laws or regulations, or new laws or regulations;

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•

our dependence on third-party distributors and third-party co-packers, including one co-packer for the substantial majority of our Rao’s Homemade sauce products;

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•

failure to protect, or litigation involving, our tradenames or trademarks and other rights;

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•

our level of indebtedness and our duty to comply with covenants under our Credit Facilities;

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•

the interests of Advent may differ from those of public stockholders; and

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the other factors set forth under “Risk Factors.”

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See “Risk Factors” for a further description of these and other factors. For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements that are included elsewhere in this prospectus. Any forward-looking statement made by us in this speaks only as of the date on which we make it. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

 

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USE OF PROCEEDS

We estimate that the net proceeds to us from our sale of 23,334,000 shares of common stock in this offering will be approximately $321.5 million, after deducting underwriting discounts and commissions and estimated expenses payable by us in connection with this offering. The underwriters also have an option to purchase up to an additional 3,500,100 shares of common stock from us. We estimate that the net proceeds to us, if the underwriters exercise their right to purchase the maximum of 3,500,100 additional shares of common stock from us, will be approximately $371.0 million, after deducting underwriting discounts and commissions and estimated expenses payable by us in connection with this offering. This assumes a public offering price of $15.00 per share, which is the midpoint of the price range set forth on the cover of this prospectus.

We intend to use the net proceeds from this offering to repay borrowings outstanding under our Credit Facilities and for general corporate purposes. Our Credit Facilities are comprised of our Initial First Lien Term Loan Facility, our Revolving Facility and our Initial Second Lien Facility (each as defined herein). The Initial First Lien Term Loans (as defined herein) mature on June 8, 2028, the Initial Revolving Loans (as defined herein) mature on June 8, 2026 and the Initial Second Lien Loans (as defined herein) mature on June 8, 2029. As of June 26, 2021, the Initial First Lien Term Loans bear interest at a rate of 5.00%, our Initial Revolving Loans bear interest at a rate of 5.00% and the Initial Second Lien Loans bear interest at a rate of 8.75%. We used the proceeds of the Initial First Lien Term Loans and the Initial Second Lien Loans to repay the full amounts outstanding under our Senior Credit Facilities (as defined herein) and finance a dividend of $400.0 million to the sole stockholder of Sovos Brands Intermediate, Inc., a wholly-owned subsidiary of the Company (“Sovos Intermediate”), in June 2021, which was ultimately distributed to the limited partners of the Partnership. See “Description of Material Indebtedness.”

Assuming no exercise of the underwriters’ option to purchase additional shares, a $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share (the midpoint of the price range set forth on the cover of this prospectus) would increase (decrease) the net proceeds to us from this offering by $22.0 million, assuming the number of shares offered by us, as set forth on the cover of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated expenses payable by us.

An affiliate of Credit Suisse Securities (USA) LLC is the administrative agent and a lender under our Initial First Lien Term Loan and, as a result, will receive less than 1% of the net proceeds from this offering based on the pro rata allocation of the repayment of such borrowings. See “Underwriting.”

 

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DIVIDEND POLICY

We do not currently intend to pay dividends on our common stock in the foreseeable future. However, in the future, subject to the factors described below and our future liquidity and capitalization, we may change this policy and choose to pay dividends. In June 2021, we used the proceeds of the Initial First Lien Term Loans and the Initial Second Lien Loans to repay the full amounts outstanding under our Senior Credit Facilities and finance a dividend of $400.0 million to the sole stockholder of Sovos Intermediate, which was ultimately distributed to the limited partners of the Partnership.

Our ability to pay dividends is currently restricted by the terms of our Credit Facilities and may be further restricted by any future indebtedness we incur.

We are a holding company that does not conduct any business operations of our own. As a result, our ability to pay dividends on our common stock is dependent upon cash dividends and distributions and other transfers from our subsidiaries.

In addition, under Delaware law, our Board may declare dividends only to the extent of our surplus (which is defined as total assets at fair market value minus total liabilities, minus statutory capital) or, if there is no surplus, out of our net profits for the then current and/or immediately preceding fiscal year.

Any future determination to pay dividends will be at the discretion of our Board and will take into account:

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restrictions in our debt instruments, including our Credit Facilities;

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general economic business conditions;

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our earnings, financial condition, and results of operations;

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our capital requirements;

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our prospects;

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legal restrictions; and

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such other factors as our Board may deem relevant.

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See “Risk Factors — Risks Related to this Offering and Ownership of Our Common Stock — We do not anticipate paying any dividends on our common stock in the foreseeable future,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources,” “Description of Material Indebtedness” and “Description of Capital Stock.”

 

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and our capitalization as of June 26, 2021:

•

on an actual basis; and

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•

on an as adjusted basis to give effect to (i) our amended and restated certificate of incorporation and amended and restated bylaws as they will be in effect upon the consummation of this offering and (ii) the sale of 23,334,000 shares of our common stock in this offering at an assumed public offering price of $15.00 per share, which is the midpoint of the price range set forth on the cover of this prospectus, and the application of the net proceeds received by us from this offering as described under “Use of Proceeds.”

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This table should be read in conjunction with “Use of Proceeds,” “Selected Historical Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Description of Capital Stock” and the consolidated financial statements and notes thereto appearing elsewhere in this prospectus.

(1)

Each $1.00 increase or decrease in the public offering price per share would increase or decrease , as applicable, our net proceeds, after deducting the underwriting discount and estimated offering expenses payable by us, by $22.0 million (assuming no exercise of the underwriters’ option to purchase additional shares). Similarly, an increase or decrease of one million shares of common stock sold in this offering by us would increase or decrease, as applicable, our net proceeds, after deducting the underwriting discount and estimated offering expenses payable by us, by $14.1 million, based on an assumed initial public offering price of $15.00 per share, which is the midpoint of the price range set forth on the cover of this prospectus.

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(2)

Amounts excluding unamortized debt issuance costs. For a description of our debt, see “Description of Material Indebtedness.”

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DILUTION

If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share of our common stock and the pro forma net tangible book value per share of our common stock upon the consummation of this offering. Dilution results from the fact that the per share offering price of our common stock is in excess of the book value per share attributable to new investors.

Our pro forma net tangible book value as of June 26, 2021 was $(701.5) million, or $(7.20) per share of common stock. Pro forma net tangible book value represents the amount of total tangible assets less total liabilities, and pro forma net tangible book value per share represents pro forma net tangible book value divided by the number of shares of common stock outstanding.

After giving effect to (i) the sale of 23,334,000 shares of common stock in this offering at the assumed initial public offering price of $15.00 per share (the midpoint of the price range set forth on the cover of this prospectus) and (ii) the application of the net proceeds from this offering, our pro forma as adjusted net tangible book value as of June 26, 2021 would have been $(380.0) million, or $(3.90) per share. This represents an immediate increase in pro forma net tangible book value (or decrease in net tangible book value deficit) of $3.30 per share to our existing investors and an immediate dilution in net tangible book value of $18.90 per share to new investors.

The following table illustrates this dilution on a per share of common stock basis given the assumptions above:

The following table summarizes, on an as adjusted basis as of June 26, 2021, after giving effect to this offering, the total number of shares of common stock purchased from us, the total cash consideration paid to us, or to be paid, and the average price per share paid, or to be paid, by new investors purchasing shares in this offering, at an assumed initial public offering price of $15.00 per share, which is the midpoint of the range set forth on the cover of this prospectus, before deducting the estimated underwriting discounts and commissions:

A $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share would increase (decrease) our pro forma net tangible book value by $22.0 million, the pro forma net tangible book value per share after this offering by $0.23 and the accretion (dilution) per share to new investors by $0.77, in each case assuming the number of shares offered by us, as set forth on the cover of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

If the underwriters were to fully exercise their option to purchase 3,500,100 additional shares of our common stock, the percentage of shares of our common stock held by existing investors would be 73.4%, and the percentage of shares of our common stock held by new investors would be 26.6%. In addition, if the underwriters exercise their option to purchase addition shares of our common stock in full, a $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share would increase (decrease)

 

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our pro forma net tangible book value by $25.3 million, the pro forma net tangible book value per share after this offering by $0.25 and the accretion (dilution) per share to new investors by $0.75, in each after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The above discussion and tables are based on the number of shares outstanding at September 8, 2021. In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of such securities could result in further dilution to our stockholders.

 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

The following tables set forth our selected historical consolidated financial data for the periods as of the dates indicated. We derived the summary consolidated statement of operations data for fiscal 2020 and fiscal 2019 and the summary consolidated balance sheet data at December 26, 2020 and December 28, 2019 from the audited financial statements and related notes thereto included elsewhere in this prospectus. Our summary consolidated statement of operations data for fiscal 2020 and summary consolidated balance sheet data as of December 26, 2020 include the results of the Birch Benders business for the period from October 23, 2020 to December 26, 2020. We derived the summary consolidated statements of operations data for the 26 weeks ended June 26, 2021 and June 27, 2020 and the consolidated balance sheet data at June 26, 2021 and June 27, 2020 from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. We have prepared the unaudited condensed consolidated financial statements on the same basis as the audited consolidated financial statements and have included all adjustments, consisting only of normal recurring adjustments that we consider necessary to state fairly the financial information set forth in those statements.

Our historical results are not necessarily indicative of future operating results. You should read the information set forth below together with “Prospectus Summary — Summary Historical Consolidated Financial and Other Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Capitalization” and our consolidated financial statements and the related notes thereto included elsewhere in this prospectus.