S-1 1 d39834ds1.htm S-1 S-1
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As filed with the Securities and Exchange Commission on July 12, 2021.

Registration No. 333-            

 

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

Weber Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

DELAWARE   3630   *
(State or Other Jurisdiction of
Incorporation or Organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)

1415 S. Roselle Road

Palatine, Illinois 60067

(847) 934-5700

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

 

 

Chris M. Scherzinger Chief Executive Officer 1415 S. Roselle Road

Palatine, Illinois 60067 (847) 934-5700

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

 

 

Copies to:

 

Michael Kaplan
Pedro J. Bermeo
Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, New York 10017
(212) 450-4000
 

Richard A. Fenyes

Joshua Ford Bonnie
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
(212) 455-2000

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, 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, a smaller reporting company or an emerging growth 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.

 

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 pursuant to Section 7(a)(2)(B) of the Securities Act.  

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title Of Each Class Of

Securities To Be Registered

 

Proposed
Maximum
Aggregate

Offering Price(1)(2)

 

Amount Of

Registration Fee

Class A common stock, par value $0.001 per share

  $100,000,000   $10,910

 

 

(1)

Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933.

(2)

Includes additional shares of Class A common stock that the underwriters have the option to purchase. See “Underwriting.”

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 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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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 we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Subject to completion, dated July 12, 2021

Preliminary Prospectus

             shares

Class A Common Stock

 

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Weber Inc.

 

 

Weber Inc. is offering              shares of its Class A common stock. This is our initial public offering and no public market exists for our Class A common stock. We anticipate that the initial public offering price of our Class A common stock will be between $             and $             per share.

Upon completion of this offering, we will have two classes of common stock: Class A common stock and Class B common stock. The Class A common stock offered hereby will have one vote per share and economic rights and the Class B common stock will have one vote per share but no economic rights. Upon completion of this offering, the Pre-IPO LLC Members (as defined herein), including entities controlled by BDT Capital Partners, LLC, our sponsor, and certain members of management, will hold shares of Class B common stock that will entitle them to     % of the combined voting power of our common stock (or     % if the underwriters exercise their option to purchase additional shares of Class A common stock in full). In addition, entities controlled by BDT Capital Partners, LLC will be able to control any action requiring the general approval of our stockholders, including the election of our board of directors, the adoption of amendments to our certificate of incorporation and bylaws and the approval of any merger or sale of the Company or substantially all of our assets. As a result, we will be a “controlled company” within the meaning of the New York Stock Exchange (“NYSE”) rules. See “Management—Board Structure—Controlled Company Exception.”

We are a holding company, and immediately after the consummation of the Reorganization Transactions (as defined herein) and this offering our principal asset will be our ownership interests in Weber HoldCo LLC. As the sole managing member of Weber HoldCo LLC, we will operate and control all of the business and affairs of Weber HoldCo LLC and, through Weber HoldCo LLC and its subsidiaries, conduct our business. See “Organizational Structure.”

We will use all of the net proceeds we receive from this offering (i) to purchase new membership interests of Weber HoldCo LLC, which we refer to as “LLC Units,” from Weber HoldCo LLC, (ii) to purchase LLC Units from certain Pre-IPO LLC Members and (iii) to repurchase a portion of our Class A common stock received by the Blocker equityholders (as defined below) in connection with the Reorganization Transactions, in each case at a price per LLC Unit and share of Class A common stock, as applicable, equal to the initial public offering price of our Class A common stock minus underwriting discounts. We will cause Weber HoldCo LLC to use the proceeds from the sale of LLC Units to Weber Inc.: (i) to pay fees and expenses in connection with this offering and the Reorganization Transactions; (ii) to repay a portion of the outstanding borrowings under our Secured Credit Facility (as defined herein) and (iii) for general corporate purposes. See “Use of Proceeds.” Weber HoldCo LLC will not receive any proceeds from purchase of LLC Units from certain Pre-IPO LLC Members by us or the repurchase of shares of Class A common stock by us.

We have applied to list our Class A common stock on the NYSE under the symbol “WEBR.”

 

 

Investing in our Class A common stock involves risk. See “Risk Factors“ beginning on page 37.

 

 

Neither the Securities and Exchange Commission, or 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.

 

 

 

     Per share      Total  

Initial public offering price

   $                    $                

Underwriting discounts and commissions(1)

   $        $    

Proceeds to us before expenses

   $        $    

 

(1)

See “Underwriting” for a description of compensation to be paid to the underwriters.

We have granted the underwriters the option to purchase an additional              shares of Class A common stock from us at the initial public offering price less the underwriting discount within 30 days of the date of this prospectus.

The underwriters expect to deliver the shares against payment in New York, New York on or about                 , 2021 through the book-entry facilities of The Depository Trust Company.

 

Goldman Sachs & Co. LLC   BofA Securities               J.P. Morgan
BMO Capital Markets   Citigroup    UBS Investment Bank    Wells Fargo Securities    KeyBanc   Capital Markets  

 

 

The date of this prospectus is                 , 2021.


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TABLE OF CONTENTS

 

 

 

     Page  

Prospectus Summary

     1  

Risk Factors

     37  

Special Note Regarding Forward-Looking Statements

     79  

Organizational Structure

     80  

Use of Proceeds

     86  

Dividend Policy

     88  

Capitalization

     89  

Unaudited Pro Forma Consolidated Financial Information

     91  

Dilution

     101  

Selected Historical Consolidated Financial Data

     103  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     106  

Letter from Chris Scherzinger, CEO

     141  

Business

     143  

Management

     166  

Compensation Discussion and Analysis

     172  

Certain Relationships and Related Party Transactions

     195  

Principal Stockholders

     203  

Description of Capital Stock

     206  

Material U.S. Federal Tax Considerations for Non-U.S. Holders of Common Stock

     214  

Shares Eligible for Future Sale

     217  

Underwriting

     219  

Legal Matters

     226  

Experts

     226  

Where You Can Find More Information

     227  

Index to Consolidated Financial Statements

     F-1  

In this prospectus, unless the context otherwise requires, “Weber,” the “Company,” “we,” “us” and “our” refer (i) prior to the consummation of the reorganization transactions described under “Organizational Structure—The Reorganization Transactions,” to Weber-Stephen Products LLC and its subsidiaries and (ii) after the reorganization transactions described under “Organizational Structure—The Reorganization Transactions,” to Weber Inc., Weber HoldCo LLC, Weber-Stephen Products LLC and their subsidiaries. “Fiscal year” refers to the year ended September 30 of a particular year. Unless otherwise stated or the context otherwise requires, all information in this prospectus reflects the consummation of the Reorganization Transactions.

We and the underwriters have not authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. We and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may provide you. We are offering to sell, and seeking offers to buy, shares of Class A common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of Class A common stock. Our business, financial condition, results of operations and prospects may have changed since the date on the front cover of this prospectus.

 

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Market and Industry Data

This prospectus includes industry and market data that we obtained from periodic industry publications, third-party studies and surveys, including (i) Frost & Sullivan: Grill Market Study, an independent third-party market study we commissioned in May 2021, (ii) MetrixLab; Brand Health & Habits Study and (iii) Hunter PR’s Food Study Special Report, filings of public companies in our industry and internal company surveys. These sources include government and industry sources. Industry publications and surveys generally state that the information contained therein has been obtained from sources believed to be reliable. Although we believe the industry and market data to be reliable as of the date of this prospectus, this information could prove to be inaccurate. Industry and market data could be wrong because of the method by which sources obtained their data and because information cannot always be verified with complete certainty due to the limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties. In addition, we do not know all of the assumptions regarding general economic conditions or growth that were used in preparing the forecasts from the sources relied upon or cited herein.

This prospectus includes references to our Net Promoter Score (NPS). A Net Promoter Score is a metric used for measuring consumer satisfaction and loyalty. We calculate our Net Promoter Score annually through an outside agency by asking a sample of consumers the following question: “How likely are you to recommend the Weber brand to a friend or colleague?” Consumers are then given a scale from 0 (labeled as “Not at all likely to recommend”) to 10 (labeled as “Extremely Likely to recommend”). Consumers rating us 6 or below are considered “Detractors”, 7 or 8 are considered “Passives”, and 9 or 10 are considered “Promoters”. To calculate our Net Promoter Score, we subtract the total percentage of Detractors from the total percentage of Promoters. For example, if 50% of overall respondents were Promoters and 10% were Detractors, our Net Promoter Score would be 40. Net Promoter Scores can range from -100 to 100. The Net Promoter Score gives no weight to consumers who decline to answer the survey question, and is asked among current grill owners about the grill brand they use most often. This method is substantially consistent with how other businesses and industries typically calculate their Net Promoter Score. Our Net Promoter Scores disclosed in this

prospectus were derived from sample sizes of 159 consumers in the U.S., 142 consumers in Germany and 266 consumers in Australia.

The sources of certain statistical data, estimates, and forecasts contained in this prospectus are provided below:

 

   

United Nations

 

   

OECD (HM1-5-Housing-stock-by-dwelling-type)

Statistics and estimates related to our Total Addressable Market, or TAM, and Serviceable Addressable Market, or SAM, are based on internal reports conducted with the assistance of our third-party marketing partner, Frost & Sullivan, Inc. In order to determine our TAM and SAM, we conducted a multi-regional survey of 4,089 consumers living in the United States, Canada, France, Germany, Australia, Argentina, Mexico and Brazil, surveying a minimum of 500 respondents per country.

Consumer responses to the survey, combined with external research, were used as the basis for determining our TAM and SAM by weighing such responses to population censuses based on poverty rate, dwelling type, grill ownership, and consumer spend for fuel and accessories. To calculate our TAM, we identified the total number of relevant households (excluding households in poverty and households without outdoor space) in 117 countries. Multiplying an annual grill spend by the targeted grill owner households, we then calculated the total grill TAM. To calculate the TAM for fuel and accessories, we considered an income level-dependent percentage of grill spend. Adding total global TAM for grills, fuel and accessories resulted in the total global TAM.

 

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In lieu of the top-down approach taken for TAM estimates, for SAM we estimated unit market share and price points for major players in the grill market in Weber’s top five countries (United States, Canada, France, Germany and Australia). To calculate the fuel costs, we considered the total number of relevant households multiplied by total spend by fuel for each specific fuel type. We then considered the total grill SAM and multiplied by 25% to calculate the total accessories spend. Adding total grill, fuel and accessories costs resulted in total SAM for the five countries noted above. We then assumed the percentage for which the top five countries accounted to find the global SAM.

Trademarks, Trade Names and Service Marks

This prospectus contains references to a number of trademarks, trade names and service marks which include our registered trademarks or service marks, such as “Weber,” “Weber Connect,” “Weber Grill Academy,” “Summit,” “SmokeFire,” “Pulse” and “Genesis,” or trademarks, trade names or service marks for which we have pending applications or common law rights. This prospectus also contains trademarks, trade names, and service marks of third parties which, to our knowledge, are the property of their respective holders. Solely for convenience, (i) references in this prospectus to trademark(s) shall also include service mark(s) and (ii) the trademarks, trade names and service marks referred to in this prospectus may appear without the TM and ® symbols, but the absence of such symbols is not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights to such trademarks, trade names and service marks. We do not intend our use or display of other parties’ trademarks, trade names or service marks to imply, and such use or display should not be construed to imply, a relationship with, or endorsement or sponsorship of us by, these other parties.

Non-GAAP Financial Measures

We provide supplemental non-GAAP financial measures that our management utilizes to evaluate our ongoing financial performance and provide additional insight to investors as supplemental information to our U.S. GAAP (as defined below) results. The use of non-GAAP financial information should not be considered as an alternative to, or more meaningful than, the comparable U.S. GAAP measures. In addition, because our non-GAAP measures are not determined in accordance with U.S. GAAP, it is susceptible to differing calculations, and not all comparable or peer companies may calculate their non-GAAP measures in the same manner. As a result, the non-GAAP financial measures presented in this prospectus may not be directly comparable to similarly titled measures presented by other companies.

We refer in this prospectus to the following non-GAAP financial measures:

 

   

Adjusted income from operations;

 

   

Adjusted net income;

 

   

EBITDA; and

 

   

Adjusted EBITDA.

These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). They are supplemental financial measures of our performance only, and should not be considered substitutes for net income, income from operations or any other measure derived in accordance with U.S. GAAP.

As used in this prospectus, these non-GAAP financial measures have the following meanings:

 

   

Adjusted income from operations is income from operations adjusted for non-cash stock compensation / Management Incentive Plan (“LTIP”) and profits interest expense, business transformation costs, operational transformation costs, impairment costs, debt refinancing and

 

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IPO costs, COVID-19 costs, foreign currency (loss) gain, and gain on disposal of assets. Adjusted income from operations excludes loss from early extinguishment of debt, interest expense, net, income taxes and loss (gain) from investments in unconsolidated affiliates;

 

   

Adjusted net income is net income adjusted for non-cash stock compensation / LTIP and profits interest expense, business transformation costs, operational transformation costs, impairment costs, debt refinancing and IPO costs, COVID-19 costs, loss from early extinguishment of debt, and gain on disposal of assets held for sale, net of the tax impact of such adjustments;

 

   

EBITDA is net income before interest expense, net, income taxes, and depreciation and amortization; and

 

   

Adjusted EBITDA is net income before interest expense, net, income taxes, depreciation and amortization, adjusted for non-cash stock compensation / LTIP and profits interest expense, business transformation costs, operational transformation costs, impairment costs, debt refinancing and IPO costs, COVID-19 operational costs, loss from early extinguishment of debt, and gain on disposal of assets held for sale.

Adjusted income from operations and adjusted net income are key metrics used by management and our board of directors to assess our financial performance. We use adjusted income from operations and adjusted net income as indicators of the productivity, profitability and performance of our business and our ability to manage expenses, after adjusting for certain one-time expenses. For a reconciliation of adjusted income from operations to income from operations and adjusted net income to net income, see “Prospectus Summary—Summary Historical and Unaudited Pro Forma Consolidated Financial Data.”

EBITDA and adjusted EBITDA are key metrics used by management and our board of directors to assess our financial performance. We use EBITDA and adjusted EBITDA to supplement U.S. GAAP measures of performance to evaluate the effectiveness of our business strategies, to make budgeting decisions, and to compare our performance against that of other companies using similar measures.

Our use of the terms adjusted income from operations, adjusted net income, EBITDA and adjusted EBITDA may vary from the use of similar terms by other companies in our industry and accordingly may not be comparable to similarly titled measures used by other companies.

The non-GAAP financial measures used in this prospectus have not been reviewed or audited by our or any independent registered public accounting firm.

Adjusted income from operations, adjusted net income, EBITDA and adjusted EBITDA have important limitations as analytical tools. For example:

 

   

All metrics do not reflect changes in, or cash requirements for, our working capital;

 

   

Adjusted income from operations, adjusted net income and adjusted EBITDA do not reflect the impact of certain expenses, including cash charges, resulting from matters we consider not to be indicative of our core operations, and do not reflect stock-based compensation expense and other non-cash charges or awards under our Management Incentive Compensation Plan, which have historically settled in cash but will be restructured to settle in stock of Weber Inc. in connection with this offering;

 

   

Adjusted net income, EBITDA and adjusted EBITDA exclude certain tax payments that may represent a reduction in cash available to us; and

 

   

EBITDA and adjusted EBITDA do not account for any cash capital expenditure requirements for the assets being depreciated and amortized that may have to be replaced in the future, nor do they reflect the interest expense or the cash requirements necessary to service interest or principal payments on our debt.

 

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PROSPECTUS SUMMARY

This summary highlights selected information that is presented in greater detail elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our Class A common stock. You should read this entire prospectus carefully, including the sections titled “Risk factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes included elsewhere in this prospectus, before deciding whether to purchase shares of our Class A common stock.

Our Mission and Purpose

Our mission at Weber is to lead the outdoor cooking industry by innovating breakthrough new products and services that enhance our global consumers’ grilling experiences. Our purpose is to ignite inspiration and discovery through everything we do, at every touchpoint with our consumers. Grilling is about making delicious food, bringing people together and creating memories. Weber is an experience, a passion, a way of life and a journey to discover what grilling can be.

Who We Are

We are the leading outdoor cooking company with the strongest and most trusted brand in the global outdoor cooking market. Our founder George Stephen, Sr., established the outdoor cooking category when he invented the original charcoal grill nearly 70 years ago. In the decades since, we have built a loyal and global following of both grilling enthusiasts and barbeque professionals in backyards all around the world. We have continuously disrupted and led the outdoor cooking category, through a comprehensive and expanding product portfolio including traditional charcoal grills, gas grills, smokers, pellet and electric grills, and recently our cutting-edge Weber Connect technology-enabled grills. We believe we offer the most complete outdoor cooking portfolio globally, with our full range of premium products sold in 78 countries in fiscal 2020.

We believe Weber is the only outdoor cooking brand with global scale and a vertically integrated manufacturing platform. Our track record of premium product innovation and the strength of our brand has led to a market-leading share of 23% in the U.S. and 24% globally in 2020, according to Frost & Sullivan. We are leaders in the largest and most attractive markets in outdoor cooking, including the U.S., Germany, Australia, Canada and France. Beyond these markets, we estimate that we have either the number one or number two brand position in each of the key geographies we serve.

We have spent decades building brand affinity and awareness by teaching people how to grill the “Weber Way.” By consistently delivering high-performing, differentiated products and best-in-class customer service, we have built a global community of passionate brand loyalists who value our innovation, uncompromising quality and performance. Over the years, families have passed down their affinity for Weber from one generation to the next, forging a deep emotional connection between consumers and our brand. We continue to deepen our relationship with our consumers by bringing innovation to our grill and accessory portfolio, introducing breakthrough connected products, expanding into new categories, and providing engaging brand experiences.

Product Innovation and Technology

Weber has developed one of the most technologically advanced outdoor cooking portfolios in the industry, and maintains a diverse product portfolio across fuel types, pricing tiers, and a wide range of


 

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accessories, consumables and services. We consistently maintain an uncompromising commitment to exceptional quality and innovative ways to cook outdoors. Accelerated technology adoption in and around the home and new home buying occasions create opportunities to further integrate our brand into the daily lives of our consumers.

With the 2020 introduction of our connected grilling platform, Weber Connect, we continue to be at the forefront of innovation in the outdoor cooking industry. Weber Connect brings together cutting-edge grilling technology, a mobile app and a cloud-based infrastructure on a single interconnected platform. We believe that our connected products make grilling the perfect meal simple with our smartphone-enabled, step-by-step cooking experience. The Weber Connect platform is powered by June OS, our award-winning smart cooking software solution developed by June Life. In 2018, we made a minority investment in June Life and entered into a license and development agreement. In January 2021, we acquired the company in full to further enhance our leadership position in connected outdoor cooking.


 

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Our current product portfolio includes:

 

 

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Omni-Channel Strategy

We bring our products to market through a diverse and powerful omni-channel network comprised of wholesale, direct-to-consumer (“DTC”) and e-commerce channels. Our wholesale channel is made up of 4,710 retailers with 31,690 physical locations. We work with leading global, regional and large multi-national retailers such as Costco Wholesale, The Home Depot, Lowe’s Companies, and Walmart Inc., as well as European retailers including Bauhaus and OBI. Independent and Specialty retailers comprise an important part of our channel mix by serving consumers who seek more education, a broader assortment of products and higher service. We believe our broad global brick-and-mortar retail presence reinforces our brand leadership. Our commitment to our retailers is evidenced by the numerous awards that we have won for our category leadership, service excellence and new product innovation. Most recently, in 2020, we were recognized as Supplier of the Year at leading retailers such as Ace Hardware and The Home Depot Canada.

Our DTC approach includes both a digital platform (Weber.com) and brick-and-mortar locations (a majority are independently operated Weber branded retail stores and Weber Grill Academy experience centers). Our DTC initiatives have led to a compounded annual revenue growth rate of 47% in our DTC business since 2018. Weber.com has been the fastest growing channel across our omni-channel network with a compounded annual revenue growth rate of 135% since 2018. Internationally, we have 170 Weber branded retail stores and Weber Grill Academy sites (161 independently operated, 9 Weber-operated) making us the only outdoor cooking brand with a global network of experiential retail environments. Our Weber branded retail stores and Weber Grill Academy sites represent a significant component of our international sales channels. At most of our Weber Grill Academy sites, we offer world-class instruction by Grill Masters with culinary expertise who help our consumers improve their cooking skills and better engage with our products. Our Weber branded stores and Weber Grill Academy sites offer unique branded experiences and consumer engagement that strengthen the consumers’ connection with the Weber brand. We believe that the physical experience of our branded retail stores and the global scale of our network would be difficult to replicate by competitors in the outdoor cooking market.


 

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With our e-commerce and digital initiatives, we have been the leaders in shifting outdoor cooking purchases to online. Our e-commerce channel is made up of the online platforms of our global, regional, and multi-national retailers such as Costco Wholesale, The Home Depot, Lowe’s, Walmart, Bauhaus and OBI, as well as digitally native retailers such as Amazon and Wayfair. We believe our online share in the U.S. in fiscal year 2020 was two times greater than that of our nearest competitor, including our revenues through Weber.com and our e-commerce partners. On Amazon, we are the number one outdoor cooking brand, and according to Weber management estimates, we captured 29% market share in the outdoor cooking category sold online in the U.S. in 2020.

Long-Term Track Record of Performance

We have experienced growth in various economic environments and have benefited from lasting consumer shifts in behavior towards outdoor cooking, which is evidenced by our 10% revenue CAGR


 

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from 1980 to 2021. Our track record of growth is driven by our iconic brand, massive installed base of loyal enthusiasts, and approximately 26% of our revenues being comprised of accessories and consumables all of which support a predictable, recurring revenue model. More recently, our significant investments in Weber Connect, Weber.com, and the ongoing consumer shifts towards backyard and outdoor leisure have further enhanced our growth profile. We expect these consumer shifts to continue in the future.

 

 

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Our Recent Financial Performance

Our compelling financial profile is characterized by stable revenue growth, solid profitability and consistent high cash flow generation.

Comparing our six months ended March 31, 2021 with six months ended March 31, 2020, we achieved the following results:

 

   

Increase in revenue from $596.4 million to $963.3 million, representing year-over-year growth of 62%;

 

   

Increase in income from operations from $56.4 million to $120.9 million, representing year-over-year growth of 114%;

 

   

Increase in net income from $23.6 million to $73.8 million, representing year-over-year growth of 213%;

 

   

Increase in adjusted income from operations from $58.3 million to $161.1 million, representing year-over-year growth of 176%;

 

   

Increase in adjusted net income from $30.6 million to $111.1 million, representing year-over-year growth of 263%;

 

   

Increase in EBITDA from $69.0 million to $141.3 million, representing year-over-year growth of 105%; and


 

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Increase in Adjusted EBITDA from $77.0 million to $186.9 million, representing year-over-year growth of 143%.

Comparing our fiscal year 2020 with fiscal year 2019, we achieved the following results:

 

   

Increase in revenue from $1,296.2 million to $1,525.3 million, representing year-over-year growth of 18%;

 

   

Increase in income from operations from $106.9 million to $151.5 million, representing year-over-year growth of 42%;

 

   

Increase in net income from $50.1 million to $88.9 million, representing year-over-year growth of 77%;

 

   

Increase in adjusted income from operations from $143.8 million to $189.0 million, representing year-over-year growth of 31%;

 

   

Increase in adjusted net income from $77.9 million to $126.0 million, representing year-over-year growth of 62%;

 

   

Increase in EBITDA from $154.0 million to $184.1 million, representing year-over-year growth of 20%; and

 

   

Increase in Adjusted EBITDA from $189.1 million to $226.7 million, representing year-over-year growth of 20%.

 

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Our History and Legacy of Innovation

We believe that our track record of innovation and category leadership is unparalleled in the outdoor cooking industry. The Weber journey began in 1952, when our founder George Stephen invented covered charcoal cooking with the iconic Weber Kettle grill. In the 1980s, we used the same ingenuity and unwavering approach to product quality and innovation to develop our Genesis gas grill, and again quickly became the market leader in the new category. In the 2000s, we disrupted the grilling market for the third time with the portable Weber Q grill and redefined mobility for millions of outdoor cooking enthusiasts. Recently, we introduced the SmokeFire wood pellet grill, the Pulse electric grill and the Weber Traveler gas grill, fueling additional expansion and leadership globally into these subcategories.

Today, we continue to disrupt the grilling category through our innovations with Weber Connect, which will further enhance the consumer experience, while staying true to our steadfast commitment to delivering premium products. We believe that the connected capabilities offered by our technology-enabled products will enable a closer relationship with our consumers and usher in a new generation of enthusiasts who will join our global community of Weber loyalists.


 

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Highly Experienced and Visionary Management Team

To achieve our goals and meet our growth initiatives, we have assembled a management team that combines world-class brand expertise and advanced technological capabilities. In mid-2018, Chris Scherzinger joined as Chief Executive Officer, after spending the prior decade in a number of group CEO roles in the largest operating divisions at Jarden Corporation and Newell Brands. Prior to joining Newell/Jarden, Mr. Scherzinger held global marketing leadership and brand management and operational roles at Johnson & Johnson, Procter & Gamble and General Electric. In 2018, Bill Horton also joined as Chief Financial Officer, having also previously served as group CFO for a number of business units within Jarden Corporation and Newell Brands from 2009 to 2018. Prior to his time with Newell/Jarden, Mr. Horton spent 12 years in a number of leadership roles with Procter & Gamble, and served in the United States Air Force for five years. During their time at Jarden Corporation and Newell Brands, Scherzinger and Horton partnered for four years as group CEO and CFO of Jarden’s largest operating segment. Our management team has a proven track record of building brands, leading market innovation, expanding distribution, driving best-in-class operations and delivering consistently strong financial results.

Our Competitive Strengths

We believe that the following competitive strengths are key drivers of our past and future success.

Iconic Global Brand and Market Leader

For nearly 70 years, the Weber brand has defined the outdoor cooking category by enriching the experience of grilling consumers around the world. Based on internal management estimates and in coordination with Frost & Sullivan, we believe revenue in our top five markets to be up to three times that of the next leading competitor. We are the most recommended brand in the outdoor cooking industry by consumers, according to MetrixLab, with total brand awareness of 87% in the United States, 86% in Germany, 89% in Australia, 74% in Canada, and 76% in France, the five largest grilling markets in the world. Our consumers often share a deep emotional connection with our iconic brand that is passed down from one generation to the next. 41% of consumers indicated Weber as the U.S. brand they are most likely to purchase next relative to only 18% and 2% for our next closest competitors, according to a 2020 MetrixLab Brand Health & Habits Survey. We are the only global manufacturer and distributor in the outdoor cooking industry with leading market share in nearly every product sub-category across geographies. The leadership of our global brand is demonstrated by holding the number one brand position in grilling, in the United States, Germany, Australia, France and Canada with 23%, 44%, 30%, 26% and 24% market share respectively, and 24% globally, according to Frost & Sullivan. In addition, we have the number one brand position in gas grilling across these five markets and the number one brand position in charcoal grilling in the United States and Australia, according to Frost & Sullivan. Gas and charcoal grill types continue to be preferred by consumers, with 51% of survey respondents indicating they are most likely to purchase a gas grill next and 26% indicating charcoal grills, relative to only 3% for pellet grills, according to a 2020 MetrixLab Brand Health & Habits Survey. Our brand leadership is further emphasized by our 22 global points of distribution through wholesale and direct retail channels across 78 countries.

Massive Community of Loyal Weber Enthusiasts

Since 1952, we have cultivated deep bonds with generations of Weber owners and their families, as evidenced by our massive installed base of 30 million Weber grills in the U.S. and 50 million Weber grills globally. Our installed base coupled with impressive net promoter scores of 62 in the U.S., 65 in


 

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Germany and 52 in Australia, as of 2020, enable a powerful recurring revenue model through repeat grill sales, and branded accessories and consumables purchases. Our installed base continues to grow as we expand in international markets, where we combine what consumers love about their local grilling traditions with the magic of the Weber grilling experience. Our marketing strategies and recent investments in Weber.com continue to grow our massive community of Weber enthusiasts, with 65 million site visits in 2020 globally, representing an increase of 83% compared to 2019. Alongside this growth in Weber.com, we are rapidly building database marketing initiatives to further enhance our consumer relationships and maximize purchase frequency.

Leader in Product Development with Exceptional Quality

Disruptive innovation has been part of the Weber culture since the introduction of the iconic Weber Kettle grill in 1952. Today we continue our legacy of innovation with our SmokeFire wood pellet grills, Pulse electric grills, and our Weber Connect platform. We believe that the Weber Connect platform has set the standard for connected grilling, as evidenced by the recent Consumer Electronics Show Award for best Connected-Home Product in 2020, and represents the future of our industry. We believe that our acquisition of June Life provides us with industry-leading in-house software engineering talent that will help drive continued innovation for years to come.

Throughout the decades, we have maintained an uncompromising approach to exceptional quality and performance. We believe this has allowed us to expand from our roots in charcoal grills to a diverse portfolio across price points and fuel types, including gas grills, electric grills, smokers, pellet grills and accessories, consumables and services. We pride ourselves on bringing our commitment to quality and performance standards in each new category we enter. Weber is also recognized for developing and utilizing industry-leading features in the grilling category, such as Flavorizer bars (for even heating) and porcelain-enameled coating (for withstanding the high-heat applications). We employ an in-house team of engineers and designers to develop our products to ensure they meet our high standards of performance and quality. We also employ a best-in-class customer service organization that fuels brand satisfaction and loyalty.

Diversified Global Revenue Base and Broad Network of Distribution Partners in Each Region

The iconic nature of our global brand enables us to sell in 78 countries across six continents. In 2020, approximately 58% of our revenue was generated in the Americas, 35% in Europe, Middle East and Africa (“EMEA”) and 7% in Asia-Pacific (“APAC”). We distribute our products through a diverse and powerful omni-channel platform, consisting of our wholesale, DTC and e-commerce channels. Across our distribution network, we believe Weber is the outdoor cooking brand that reinforces our distribution partners’ presence in the grilling category. In our wholesale channel, we work with leading global retailers including Ace Hardware and Costco Wholesale across the Americas, Europe and Asia. Our wholesale business also spans large international retail partners such as The Home Depot, Lowes Companies and Walmart Inc. across the U.S., Canada and Mexico, as well as Bauhaus and OBI in Europe. According to management estimates, at Ace Hardware, The Home Depot and Lowes, we represented 52%, 39%, and 32% dollar share of each retailer’s grilling category respectively in 2020. Across other regions, we distribute our products through a global network of independent and specialty dealers. Our DTC channel provides an unparalleled customer experience at Weber.com and our independently operated Weber branded retail stores and Weber Grill Academy sites. Weber.com features our complete product assortment and exclusive online offerings so consumers are able to compare products, read reviews and transact in a virtual environment. To complement our online presence, we operate a network of 170 Weber branded retail stores globally, which are strategically located in markets where we are leading consumer shifts to popularize the


 

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outdoor cooking industry. To further enhance our online presence, we offer our products on the online platforms of our retailer partners and digitally native retailers such as Amazon.com, where we are the number one outdoor cooking brand in the U.S. and capture 29% of the outdoor grill category.

U.S.-Led, Global Manufacturing Footprint and World-Class Supply Chain

We are a vertically integrated manufacturer and the only major outdoor cooking company that maintains a significant U.S.-based manufacturing footprint that is complemented by other manufacturing capabilities throughout the world. We operate three manufacturing facilities in Illinois with core competencies in metal fabrication, welding, deep drawn stamping and porcelain-enameled coatings. In 2018, our U.S. operations were consolidated into our Huntley facility where approximately 55% of our global grill demand is currently produced. In addition, Weber maintains trusted relationships of more than 15 years with three major grill manufacturers in China and Taiwan to provide flexibility to produce some of our grills, which provides redundant manufacturing of key product lines. We have a long-standing history with a diversified set of suppliers who send components to our U.S. manufacturing facilities as well as our China manufacturing partners. Our 22 global distribution facilities serve 78 countries and have capabilities including truckload shipping to our customers and parcel service to support our growing DTC business. Our U.S.-led, diversified global manufacturing and distribution footprint provides Weber with a significant competitive advantage, allowing for a balanced combination of quality, speed and agility in response to customer demand locally and globally. We believe our diversified manufacturing platform also enables us to better manage potential supply chain disruptions and navigate changes in tariff policies more effectively than our competitors.

In 2020, we expanded our “Make Where We Sell” philosophy, and continued growth in the EMEA region drove the decision to commission a manufacturing plant in Europe and break ground on a new facility in Zabrze, Poland. This new location will manufacture and distribute key product lines for the EMEA market and is expected to open for operation in the fourth quarter of fiscal year 2021. The strategic location of this facility will facilitate reduced labor and transportation costs, resulting in positive improvements to our operating margin. The breadth and depth of our supply chain initiatives have been, and will continue to be, a key business focus and source of strong cash flow generation.

Exceptional Financial Profile Through Business Cycles

Weber has a long track record of strong growth and resilient financial performance, through periods of varying macro-economic cycles. Our growth has been broad-based across product categories and geographies. Weber benefits from countercyclical trends associated with “eat at home” categories, where challenging economic periods lead families to cook and spend more time at home. However, Weber also thrives in strong economic times when disposable income and investments in and around the home and backyard are strong. Our business maintains a strong margin profile driven by our consistent premium pricing strategy, global scale, vertically integrated manufacturing capabilities, operational productivity programs and commitment to value-added product innovations. We are well positioned to continue to execute on our operational excellence initiatives, including our new manufacturing and distribution facility in Poland. Our resilient growth, margin improvement and efficient capital intensity all contribute to our strong free cash flow. Our strong free cash flow profile allows for significant capital allocation flexibility, enabling long-term shareholder value creation through multiple operating and financial strategies.

Highly Experienced and Visionary Management Team

We believe our management team, led by CEO Chris Scherzinger and CFO Bill Horton, is among the most experienced in the industry, representing decades of leading global consumer brands. We


 

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have built a broad executive leadership team with extensive brand building experience from companies such as Amazon, Bosch, Danaher, Dyson, General Motors, Royal Dutch Shell, Unilever, Whirlpool and more. In addition, with our recent acquisition of June, we have acquired software and hardware engineering talent from Apple, Google, Lyft, Microsoft, SpaceX, Tesla and other leading technology companies. Our management team is uniquely capable of executing upon our strategic vision and successfully continuing to create long-term shareholder value by scaling our business, leading innovation, expanding distribution, and managing expansive global operations.


 

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Our Growth Strategy

 

LOGO


 

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We intend to build on our competitive strengths and deliver sustainable growth by executing on the following strategies:

Introduce New and Disruptive Products

We have a proven track record of consistently expanding our product portfolio to meet the evolving needs of our consumers. Our culture of innovation and strong manufacturing capabilities allow us to introduce disruptive and differentiated new products. Our success is evidenced by our diverse product portfolio and recent launches across technology, grilling, accessories, consumables and services including:

 

   

Grilling Innovations — Historically, we have captured share in the outdoor cooking market by launching grill products that have revolutionized our consumer’s grilling experience. Our legacy of innovation started over 70 years ago when we invented the iconic Weber Kettle and transformed the charcoal grilling market. Since then, we have introduced the Genesis gas grill, the portable Weber Q grill, and the Pulse electric grill. In 2020, we launched the SmokeFire wood pellet grill to capitalize on demand in the fast-growing pellet grill sub-category. We believe the SmokeFire wood pellet grill will have a similar impact on the pellet industry as our iconic grills have had historically in their respective categories. We also have a long track record of success refreshing products in existing categories, which allows customers to upgrade while staying loyal to the Weber brand.

 

   

Weber Connect — In 2020, we introduced our new connected device platform, Weber Connect powered by June OS. This Consumer Electronics Show award-winning precision grilling technology was first made available as the stand-alone Smart Grilling Hub, and as an integrated feature in our SmokeFire wood pellet grill. Today, Weber Connect is also available in our Genesis / Spirit gas grill and Pulse electric grill. We intend to make Weber Connect available in our charcoal grills and smokers in the future. Weber Connect is an integral part of our connected product pipeline of cutting-edge, technology-enabled grills and devices that will enhance the grilling experience for consumers.

 

   

Accessories, Consumables and Services — Over the past 70 years, we have consistently developed and launched Weber branded outdoor cooking accessories and consumables to complement our core offering and provide a predictable, recurring revenue stream. These product offerings help ensure that Weber’s iconic brand stays at the forefront of all facets of the outdoor cooking experience while also providing attractive margins. We have developed a robust product pipeline that includes tools and cookware, cleaning supplies, multiple fuel types, gear, carts and covers, among others. Innovation in our growing accessory and consumables business will continue to create higher transaction frequency and drive increased consumer loyalty. We also intend to expand our service offerings to capitalize on our best-in-class customer service organization and the global footprint of our Weber branded retail stores and Weber Grill Academy sites to capture new revenue streams.

As we have done throughout our history, we have identified opportunities for new product introductions in existing and new categories. We will continue to leverage our extensive experience and deep expertise to continue to regularly introduce new products that differentiate us from our competition and accelerate our growth.


 

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Accelerate Direct-to-Consumer and E-Commerce Revenue

Our DTC and e-commerce channels represented 20% of our revenue in 2020 and have grown 31% annually since 2018. Our DTC channel includes Weber.com, our independently operated Weber branded retail locations and Weber Grill Academy sites. Within our DTC channel, Weber.com has experienced explosive growth achieving a 135% CAGR from 2018 to 2020. Weber.com is a strategic focus as we believe consumers enjoy engaging directly with our brand through this channel. Due to our efforts, visits to Weber.com have expanded rapidly as evidenced by the 65 million global site visits we achieved in 2020, representing an increase of 83% compared to 2019. We also have long-standing relationships with the largest e-commerce players in our industry, including Amazon, HomeDepot.com and Lowes.com, and have experienced significant growth in this channel over the last several years. Our network of 170 Weber branded retail locations deliver an immersive brand experience for consumers as well as engagement with culinary grilling experts and knowledgeable staff. We believe there is a significant opportunity to increase DTC revenue by accelerating site visits and engagement of Weber.com and partnering with our retailers to launch additional Weber branded retail locations and Weber Grill Academy sites in attractive geographies throughout the world. We also expect purchasing to continue to migrate online providing positive tailwinds for our e-commerce channel.

Expand Customer Base and Consumer Revenue Streams

In the last three years, Weber has added more than $200 million from new retail customers that did not distribute our brand prior to 2018. We have also demonstrated the ability to add new consumers: over the past three years, we have added nearly 12 million Weber Grill households in our top five markets, an increase of 22%. We have invested significantly in all facets of marketing to fuel this growth. From 2018 to 2020, we increased our advertising and marketing spending by 14%. In addition, we have bolstered our consumer insights, analytics and marketing team, hiring over 40 new positions in the last 12 months, to strengthen our marketing organization and build broader capabilities. In addition to adding new consumers, we believe we have a sizable opportunity to optimize direct engagement with our existing consumer base and create new sources of revenue. We currently maintain a database of millions of registered consumers; that base, supplemented with new data from sources like Weber.com and our connected products, gives us the ability to personalize marketing, promotional offers and programs to drive increased consumer loyalty. This will open up new revenue streams like incremental accessory sales and new customized subscription services.

Expand and Deepen Our Presence in Emerging Geographies

We believe we have the opportunity to continue to expand into additional growing international markets. We intend to focus on the most attractive markets in Asia, Europe and Latin America. Within these markets, we aim to enhance the consumer outdoor cooking experience and teach millions of people how to grill the “Weber Way.” Although our top 12 developing markets currently account for approximately 10% of our revenue, we believe we can meaningfully expand this percentage in the future, to grow our customer base and drive net sales. Historically, the growth in our developing markets has been nearly two times the growth of our mature markets and we believe this pattern can be repeated as we expand in these emerging geographies and increase our global brand awareness.

Execute on Value-Enhancing Operational Initiatives

In 2018, we launched our “Fuel the Growth” initiative to improve productivity within our supply chain, focusing on “Make Where We Sell” initiatives and distribution footprint optimization projects. To date, we have achieved over $64 million in gross productivity savings which has resulted in 150 bps of margin improvement and allowed us to increase growth investments. Key ongoing drivers of our Fuel


 

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the Growth initiative include sourcing initiatives in Mexico, Poland and Southeast Asia, our U.S. assembly plant consolidation, our new EMEA manufacturing facility in Zabrze, Poland and our distribution network optimization initiatives. In addition, we have various ongoing continuous improvement projects within our plants and distribution centers. We believe there is a significant opportunity for us to continue to expand our margins.

Our Industry and Opportunity

We operate in the large, growing global outdoor cooking market which we believe is highly predictable, recurring and resilient. This market is comprised of outdoor products that include gas grills, charcoal grills, wood pellet grills, electric grills, smokers, grilling accessories, and solid fuel products (including charcoal briquettes, lump charcoal, pellets, and wood chips and chunks).

According to MetrixLab the installed base of U.S. grills is nearly 70 million units representing 56% penetration of U.S. households. We estimate that more than 30 million of these grills are Weber grills, based on MetrixLab, and are being replaced at a rate of over 2 million units per year. While we benefit from growth from our installed base, our business is not dependent on replacements. We will continue to grow based on the increasing number of first-time grill buyers; consumers purchasing second grills with a different fuel type; heightened demand for specialty grills such as smokers, pellet grills, electric grills and kamado grills; and additional revenue streams including accessories, consumables and grill services. We expect the outdoor cooking market will continue to benefit from increased investment in and around the home as well as macro consumer trends in at home food consumption, culinary exploration and health and wellness.

We believe that several fundamental shifts in consumer behavior are providing positive tailwinds for our industry, including the increasing adoption of outdoor lifestyles and rising focus on health and wellness. More than half (54%) of consumers report cooking more in 2020 and 52% of people cited health as one of their top reasons for cooking at home based on a survey from Hunter PR. The COVID-19 pandemic accelerated certain trends that benefited our industry, and, according to a 2020 survey of grill owners, 85% of grillers globally expect to grill as often or more often after the pandemic than they did before the pandemic. We believe that the grill represents the center of any outdoor lifestyle and our industry will see continued resiliency through the business cycle and growth driven by increasing demand for outdoor spaces.

We consider our market opportunity in terms of TAM, which we believe is the number of total households that are able to own a grill and could be interested in purchasing a new one in current geographies where Weber operates and in potential markets, and SAM, which we define as the total number of households that purchased a grill in a given year in markets where Weber currently operates.

According to Frost & Sullivan, our TAM is estimated at $49 billion globally and $9 billion in the United States and our SAM is estimated at $15 billion globally and $7 billion in the United States From 2015 to 2020, our SAM grew at a 3.0% CAGR and is projected to grow at a 4.5% CAGR from 2020 to 2025. We expect to grow both TAM and SAM as we expand beyond our current geographies and grow SAM as we introduce new products in our existing verticals and add new verticals to our product portfolio in geographies where we currently operate. As of 2020, we are approximately 7% penetrated in our global TAM and 18% penetrated in our U.S. TAM. For additional discussion of the methodology used to determine our TAM and SAM, see the section entitled “Market and Industry Data.”

 


 

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LOGO

Recent Developments

Preliminary Estimated Financial Data

Set forth below are preliminary estimates of certain of our consolidated financial data as of and for the three months ended June 30, 2021 and actual consolidated financial data as of September 30, 2020. Our consolidated financial statements as of and for the three months ended June 30, 2021 are not yet available and are subject to completion of our financial closing procedures. The following information reflects our preliminary estimates based on currently available information and is subject to change. We have provided ranges, rather than specific amounts, for the preliminary estimated results described below primarily because we are still in the process of finalizing our financial and operating results as of and for the three months ended June 30, 2021 and, as a result, our final reported results may vary materially from the preliminary estimates. The preliminary estimated financial data set forth below have been prepared by, and are the responsibility of, our management. Our auditors have not audited, reviewed, compiled or applied agreed-upon procedures with respect to the preliminary estimated financial data. Accordingly, our auditors do not express an opinion or any other form of assurance with respect thereto. Our preliminary estimated results also include non-GAAP financial measures. Neither such measures nor our estimates of GAAP results should be viewed as a substitute for interim financial statements prepared in accordance with GAAP. You should not place undue reliance on the preliminary estimates, and the preliminary estimates are not necessarily indicative of the results to be expected in the future. The preliminary estimates should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Special Note Regarding Forward-Looking


 

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Statements,” “Risk Factors” and the consolidated financial statements and related notes thereto included elsewhere in this prospectus.

 

     For the Three
Months Ended
June 30, 2021
 
(Dollars in thousands)    Low      High  
     (unaudited)  

Net sales

   $                $            

Net income

     

Adjusted EBITDA(1)

     

 

     As of  
     September 30,
2020
     June 30,
2021
 

Cash and cash equivalents

     

Long term debt, less current portion

     

 

(1)

We define Adjusted EBITDA as net income before interest expense, net, income taxes, depreciation and amortization, adjusted for non-cash stock compensation / LTIP and profits interest expense, business transformation costs, operational transformation costs, impairment costs, debt refinancing and IPO costs, COVID-19 operational costs, loss from early extinguishment of debt, and gain on disposal of assets held for sale.

The following table reconciles net income to Adjusted EBITDA for the period presented.

 

     For the Three Months
Ended June 30, 2021
 
(Dollars in thousands)    Low      High  

Net income

                                               
  

 

 

    

 

 

 

Adjustments:

     

Interest expense, net

     

Income tax expense

     

Depreciation and amortization

     

Non-cash stock compensation / LTIP and profits interest costs

     

Business transformation costs

     

Operational transformation costs

     

Impairment costs

     

Debt refinancing and IPO costs

     

COVID-19 costs

     

Loss from early extinguishment of debt

     

Gain on disposal of assets held for sale

     
  

 

 

    

 

 

 

Adjusted EBITDA

     
  

 

 

    

 

 

 

 

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April Transactions

In April 2021, Weber-Stephen Products, LLC consummated a series of equity repurchase agreements to repurchase common units held by WSP Investment LLC, an entity held by the Stephen family, for an aggregate amount of approximately $189 million, and additionally issued a special distribution to its equityholders in an aggregate amount of approximately $261 million (collectively, the “April Transactions”). Weber financed the April Transactions using cash on hand and approximately $170 million of borrowings under the revolving facility of our Secured Credit Facility. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”

As of June 30, 2021, we had fully repaid the $170 million of borrowings used to finance the April Transactions and, accordingly, as of June 30, 2021, we had no outstanding borrowings other than approximately $6.4 million in undrawn letters of credit, or approximately $293.6 million of available capacity, under the revolving facility of our Secured Credit Facility and approximately $146.5 million of cash on hand. For more information regarding the effect of the April Transactions as well as our subsequent repayment of indebtedness, see “Unaudited Pro Forma Consolidated Financial Information.”

R. McDonald Acquisition

Also in April 2021, Weber-Stephen Products, LLC acquired substantially all of the assets of R. McDonald Co. Pty. Ltd., a sales and marketing company headquartered in Australia, for approximately $29 million in cash and $14 million in equity. As part of the acquisition, the Company reacquired R. McDonald’s exclusive rights to sell and market Weber products in Australia and New Zealand. See note 17 to our unaudited consolidated financial statements for the six months ended March 31, 2021 included elsewhere in this prospectus.

Risk Factors

Participating in this offering involves substantial risk. Our ability to execute our strategies also is subject to certain risks. The risks described under the heading “Risk Factors” immediately following this summary may cause us not to realize the full benefits of our competitive strengths or may cause us to be unable to successfully execute all or part of our strategies. Some of the more significant challenges and risks we face include the following:

 

   

maintaining and strengthening our brand to generate and maintain ongoing demand for our products;

 

   

our ability to execute our business objectives and growth strategies successfully, including our efforts to expand into new markets, or sustain our growth;

 

   

the high degree of competition in the markets in which we operate;

 

   

the impacts of both extreme weather events and unusual or poor weather patterns;

 

   

seasonal and quarterly variations in our operating results;

 

   

the sensitivity of our operating results to general economic conditions and levels of consumer discretionary spending;

 

   

our reliance on information technology systems and proprietary software;

 

   

our exposure to numerous international business risks due to our reliance on foreign suppliers and our global presence in international markets;


 

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our reliance on our own internal network of manufacturing and distribution facilities, including a small number of key geographical locations that constitute our principal manufacturing and distribution centers;

 

   

disruptions in our supply chain and manufacturing and distribution channels;

 

   

the impacts of tariffs and exchange rate fluctuations;

 

   

fluctuations in the cost and availability of raw materials, equipment, labor, and transportation; and

 

   

a significant portion of our sales are to large, multi-national retail partners and our business could be harmed if these retail partners cease to carry our current products, choose not to carry new products that we develop or cease operations altogether.

Before you invest in our Class A common stock, you should carefully consider all the information in this prospectus, including matters set forth under the heading “Risk Factors.”

Organizational Structure

Weber Inc., a Delaware corporation, was formed in April 2021 and is the issuer of the Class A common stock offered by this prospectus. We currently conduct our business through Weber-Stephen Products LLC. Following this offering, Weber Inc. will be a holding company and its sole asset will be a controlling equity interest in Weber HoldCo LLC, a Delaware limited liability company formed in April 2021; Weber-Stephen Products LLC will be a wholly owned subsidiary of Weber HoldCo LLC.

All of Weber-Stephen Products LLC’s outstanding equity interests are currently owned by the following persons and entities, to whom we refer collectively as the “Pre-IPO LLC Members:”

 

   

BDT WSP Holdings, LLC, an entity controlled by BDT Capital Partners, LLC, our sponsor;

 

   

WSP Investment LLC, an entity held by the Stephen family;

 

   

Weber-Stephen Management Pool LLC, an entity held by current and former members of our management team and directors; and

 

   

certain other historical equityholders.

In connection with this offering, we intend to enter into the following series of transactions to implement an internal reorganization, which we collectively refer to as the “Reorganization Transactions:”

 

   

Weber Merger Sub, LLC, a subsidiary of Weber Inc. formed in April 2021, will merge with and into BDT WSP Blocker, LLC (“Blocker”), an entity controlled by BDT Capital Partners, LLC, our sponsor, with Blocker surviving the merger. As a result, (i) the Blocker equityholders will receive Class A common stock of Weber Inc. in exchange for their equity interests in Blocker, (ii) the nominal shares of Weber Inc. held by Weber-Stephen Products LLC will be canceled for no consideration (because Weber Inc. was originally formed as a subsidiary of Weber-Stephen Products LLC) and (iii) Weber Inc. will become wholly owned by the former Blocker equityholders;

 

   

Blocker will then merge with and into Weber Inc., with Weber Inc. surviving the merger. Weber Inc.’s certificate of incorporation will be amended to authorize the issuance of two classes of common stock: Class A common stock and Class B common stock, which we refer to collectively as our “common stock.” Each share of Class A common stock and Class B common stock will entitle its holder to one vote per share on all matters submitted to a vote of our stockholders. See “Description of Capital Stock”;


 

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WSP Merger Sub, a subsidiary of WSP Intermediate formed in April 2021, will merge with and into Weber-Stephen Products LLC, with Weber-Stephen Products LLC surviving the merger. As a result, (i) the Pre-IPO LLC Members will receive non-voting common interest units (the “LLC Units”) in Weber HoldCo LLC in exchange for all of their equity interests in Weber-Stephen Products LLC, (ii) Weber-Stephen Management Pool LLC will receive LLC Units in exchange for all equity interest that it holds in Weber-Stephen Products LLC and profits interests (the “Profits Interests”) in Weber HoldCo LLC with terms substantially similar to the terms of the profits interests that it holds in Weber-Stephen Products LLC and (iii) Weber-Stephen Products LLC will become a wholly owned subsidiary of Weber HoldCo LLC;

 

   

the LLC Agreement of Weber HoldCo LLC will be amended and restated prior to this offering to, among other things, appoint Weber Inc. as the sole managing member of Weber HoldCo LLC;

 

   

members of the management team who indirectly hold Profits Interests through their direct interests in Weber-Stephen Management Pool LLC will be able to direct Weber-Stephen Management Pool LLC to convert those Profits Interests into a number of LLC Units based on a formula that calculates the positive difference between the then implied value of an LLC Unit and the then applicable threshold price associated with the Profits Interest;

 

   

as sole managing member of Weber HoldCo LLC, Weber Inc. will have sole authority to determine the amount and timing of distributions from Weber HoldCo LLC and offer LLC Units to future Partners, subject to any limitations set forth under the Secured Credit Facility. Because we will manage and operate the business and control the strategic decisions and day-to-day operations of Weber HoldCo LLC and will also have a substantial financial interest in Weber HoldCo LLC, we will consolidate the financial results of Weber HoldCo LLC, and a portion of our net income will be allocated to noncontrolling interest to reflect the entitlement of the Pre-IPO LLC Members to a portion of Weber HoldCo LLC’s net income. In addition, because Weber HoldCo LLC will be under the common control of BDT Capital Partners, LLC before and after the Reorganization Transactions, we will account for the Reorganization Transactions as a reorganization of entities under common control and will initially measure the interests of the Pre-IPO LLC Members in the assets and liabilities of Weber HoldCo LLC at their carrying amounts as of the date of the completion of these Reorganization Transactions;

 

   

each of the Pre-IPO LLC Members will be issued shares of our Class B common stock in an amount equal to the number of LLC Units held by each such Pre-IPO LLC Member;

 

   

under the Amended LLC Agreement, all current and future holders of LLC Units (including LLC Units issued upon conversion of Profits Interests), including the Pre-IPO LLC Members, will have the right, from and after the completion of this offering, to require Weber HoldCo LLC to redeem all or a portion of their LLC Units for, at our election, newly issued shares of Class A common stock on a one-for-one basis or a cash payment equal to the volume weighted average market price of one share of our Class A common stock for each LLC Unit redeemed (subject to customary adjustments, including for stock splits, stock dividends and reclassifications) in accordance with the terms of the Amended LLC Agreement (the “Redemption Right”). Additionally, in the event of a redemption request by a holder of LLC Units, we may, at our option, effect a direct exchange of cash or Class A common stock for LLC Units in lieu of such a redemption. A corresponding number of shares of Class B common stock will be canceled on a one-for-one basis if we, following a redemption request of a holder of LLC Units, redeem or exchange LLC Units of such holder of LLC Units pursuant to the terms of the Amended LLC Agreement. See “Certain Relationships and Related Party Transactions—Amended LLC Agreement.” Except for transfers to us pursuant to the Amended LLC


 

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Agreement or to certain permitted transferees, the holders of LLC Units are not permitted to sell, transfer or otherwise dispose of any LLC Units or shares of Class B common stock;

 

   

members of the management team who indirectly hold LLC Units (including LLC Units issued upon conversion of Profits Interests) through their direct interests in Weber-Stephen Management Pool LLC will be able to exercise the Redemption Right with respect to those LLC Units (to the extent vested) by directing Weber-Stephen Management Pool LLC to distribute those LLC Units to them (in redemption of a corresponding number of their interests in Weber-Stephen Management Pool LLC), which will then be redeemed pursuant to the Redemption Right;

 

   

Weber Inc. will enter into a Tax Receivable Agreement that will obligate us to make payments to the Pre-IPO LLC Members and any future party to the Tax Receivable Agreement generally equal to 85% of the applicable cash savings that we actually realize as a result of Weber Inc.’s allocable share of certain existing tax basis in tangible and intangible assets related to certain transactions that resulted in a step-up in Weber HoldCo LLC’s tax basis, certain tax basis adjustments resulting from the purchase of LLC Units from the Pre-IPO LLC Members in connection with or after this offering, future taxable redemptions or exchanges of LLC Units by the holders of LLC Units and from payments made under the Tax Receivable Agreement. We will retain the benefit of the remaining 15% of these tax savings;

 

   

Weber Inc. and the Pre-IPO LLC Members will enter into the Stockholders Agreement, which will, among other things, provide that, for so long as the Pre-IPO LLC Members beneficially hold at least 10% of the aggregate number of outstanding shares of our common stock, which we refer to as the “Substantial Ownership Requirement,” approval by the Pre-IPO LLC Members will be required for certain corporate actions;

 

   

Weber Inc. will issue                  shares of Class A common stock to the public pursuant to this offering;

 

   

Weber Inc. will use all of its net proceeds from this offering (i) to acquire                 newly issued LLC Units from Weber HoldCo LLC, (ii) to acquire LLC Units from certain Pre-IPO LLC Members, and (iii) to repurchase              shares of the Class A common stock received by the Blocker equityholders in connection with the merger of Weber Merger Sub, LLC with and into Blocker described in the first step of these Reorganization Transactions, in each case at a price per LLC Unit and share of Class A common stock equal to the initial public offering price of our Class A common stock minus underwriting discounts; and

 

   

Weber Inc. will cause Weber HoldCo LLC to use the proceeds from the sale of the LLC Units to Weber Inc. as follows: (i) to pay fees and expenses of approximately $             in connection with this offering and the Reorganization Transactions; (ii) to repay $             of the outstanding borrowings under our Secured Credit Facility and (iii) for general corporate purposes. Weber HoldCo LLC will not receive any proceeds from the purchase of LLC Units from certain Pre-IPO LLC Members by us or from the repurchase of shares of Class A common stock by us. See “Use of Proceeds.”


 

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The diagram below depicts our Organizational Structure immediately following the Reorganization Transactions, this offering and the application of the net proceeds from this offering, assuming an initial public offering price of $             per share (the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus) and no exercise of the underwriters’ option to purchase additional shares. This chart is provided for illustrative purposes only and does not purport to represent all legal entities within our Organizational Structure.

 

 

LOGO

 

(1)

Also includes Blocker equityholders that will receive          shares of Class A common stock in the Reorganization Transactions.

Upon the completion of this offering and the application of the net proceeds therefrom, Weber Inc. will be appointed as sole managing member of Weber HoldCo LLC, and, assuming no exercise of the underwriters’ option to purchase additional shares, Weber Inc. will hold                  LLC Units, constituting         % of the outstanding economic interests in Weber HoldCo LLC (or                LLC Units, constituting         % of the outstanding economic interests in Weber HoldCo LLC if the underwriters exercise their option to purchase additional shares of Class A common stock in full) and the Pre-IPO LLC Members will hold (i)                  LLC Units, representing approximately         % of the economic interest in Weber HoldCo LLC (or         % if the underwriters exercise their option to purchase additional shares of Class A common stock in full) and (ii) through their ownership of Class B common stock, approximately         % of the combined voting power of our common stock (or         % if the underwriters



 

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exercise their option to purchase additional shares of Class A common stock in full). Additionally, Blocker equityholders will hold         % of the combined voting power of our common stock (or         % if the underwriters exercise their option to purchase additional shares of Class A common stock in full). See “Organizational Structure,” “Certain Relationships and Related Party Transactions” and “Description of Capital Stock” for more information on the rights associated with our common stock and the LLC Units. Upon the completion of this offering, there will be                  LLC Units outstanding. There are no limitations in the Amended LLC Agreement on the number of LLC Units issuable in the future and we are not required to own a majority of LLC Units.

The acquisition of LLC Units from certain of our existing equityholders in connection with this offering and future taxable redemptions or exchanges by holders of LLC Units for shares of our Class A common stock or cash are expected to produce tax basis adjustments that will be allocated to us and thus favorable tax attributes. These tax attributes would not be available to us in the absence of those transactions. In connection with the Reorganization Transactions, we will enter into the Tax Receivable Agreement that will obligate us to make payments to the Pre-IPO LLC Members and any future party to the Tax Receivable Agreement generally equal to 85% of the applicable cash savings that we actually realize as a result of these tax attributes and tax attributes resulting from payments made under the Tax Receivable Agreement. We will retain the benefit of the remaining 15% of these tax savings. See “Organizational Structure—Holding company structure and the Tax Receivable Agreement.”

Our Sponsor

BDT Capital Partners, LLC, through its affiliated investment funds (collectively, “BDTCP”), has been our controlling shareholder in partnership with the Stephen family and management, since its investment in December 2010. BDT Capital Partners provides family- and founder-led businesses with long-term, differentiated capital. The firm has raised over $18 billion across its investment funds and placed more than $7 billion of co-investments with its global limited partner investor base. The firm’s affiliate, BDT & Company, LLC, is a merchant bank that works with family- and founder-led businesses to pursue their strategic and financial objectives. BDT & Company provides solutions-based advice and access to a world-class network of business owners and leaders.

After the closing of this offering, BDTCP will own approximately         % of our outstanding common stock (or approximately         % if the underwriters exercise their option to purchase additional shares in full).

Corporate Information

We were incorporated in the State of Delaware in April 2021. We are a newly formed corporation, have no material assets and have not engaged in any business or other activities except in connection with the Reorganization Transactions. Our principal executive offices are located at 1415 S. Roselle Road, Palatine, Illinois 60067, and our telephone number is (847) 934-5700. Our website is www.weber.com. Our website and the information contained therein or connected thereto is not incorporated into this prospectus or the registration statement of which it forms a part.



 

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The Offering

This summary highlights information presented in greater detail elsewhere in this prospectus. This summary is not complete and does not contain all the information you should consider before investing in our Class A common stock. You should carefully read this entire prospectus before investing in our Class A common stock, including “Risk Factors” and our consolidated financial statements.

 

Class A common stock offered by us

             shares (or              shares if the underwriters exercise their option to purchase additional shares of Class A common stock in full).

 

Class A common stock to be outstanding after this offering

             shares.

 

  If the underwriters exercise their option to purchase additional shares of Class A common stock in full, shares will be outstanding (or              shares if all outstanding LLC Units held by the Pre-IPO LLC Members were redeemed or exchanged for a corresponding number of newly issued shares of Class A common stock).

 

Class A common stock to be outstanding after conversion of all LLC Units

             shares if all outstanding LLC Units held by the Pre-IPO LLC Members were redeemed or exchanged for a corresponding number of newly issued shares of Class A common stock.

 

Class B common stock to be outstanding after this offering

             shares.

 

Voting power held by holders of Class A common stock after giving effect to this offering

        % (or         % if the underwriters exercise their option to purchase additional shares of Class A common stock in full).

 

Voting power held by holders of all outstanding shares of Class B common stock after giving effect to this offering

        % (or         % if the underwriters exercise their option to purchase additional shares of Class A common stock in full).

 

Voting rights after giving effect to this offering

Each share of Class A and Class B common stock will entitle its holder to one vote per share. Investors in this offering will hold approximately         % of the combined voting power of our common stock (or         % if the underwriters exercise their option to purchase additional shares of Class A common stock in full).

 

  Class A common stock and Class B common stock generally vote together as a single class on all matters submitted to a vote of our stockholders. See “Description of Capital Stock.”

 

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Redemption rights of the holders of LLC Units

under the Amended LLC Agreement, all current and future holders of LLC Units (including LLC Units issued upon conversion of Profits Interests), including the Pre-IPO LLC Members, will have the right, from and after the completion of this offering, to require Weber HoldCo LLC to redeem all or a portion of their LLC Units for, at our election, newly issued shares of Class A common stock on a one-for-one basis or a cash payment equal to the volume weighted average market price of one share of our Class A common stock for each LLC Unit redeemed (subject to customary adjustments, including for stock splits, stock dividends and reclassifications) in accordance with the terms of the Amended LLC Agreement. Additionally, in the event of a redemption request by a holder of LLC Units, we may, at our option, effect a direct exchange of cash or Class A common stock for LLC Units in lieu of such a redemption. A corresponding number of shares of Class B common stock will be canceled on a one-for-one basis if we, following a redemption request of a holder of LLC Units, redeem or exchange LLC Units of such holder of LLC Units pursuant to the terms of the Amended LLC Agreement. See “Certain Relationships and Related Party Transactions—Amended LLC Agreement.”

 

  Except for transfers to us pursuant to the Amended LLC Agreement or to certain permitted transferees, holders of LLC Units are not permitted to sell, transfer or otherwise dispose of any LLC Units or shares of Class B common stock.

 

Use of Proceeds

We estimate that our net proceeds from this offering will be approximately $         (or approximately $         if the underwriters exercise their option to purchase additional shares of Class A common stock in full), after deducting underwriting discounts and commissions but before deducting estimated offering expenses.

 

 

We intend to use the net proceeds that we receive from this offering (i) to acquire          newly issued LLC Units from Weber HoldCo LLC, (ii) to acquire              LLC Units from certain Pre-IPO LLC Members and (iii) to repurchase              shares of the Class A common stock received by the Blocker equityholders in connection with the merger of Weber Merger Sub, LLC with and into Blocker, in each case at a price per LLC Unit and


 

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share of Class A common stock equal to the initial public offering price of our Class A common stock minus underwriting discounts.

 

  We will cause Weber HoldCo LLC to use the proceeds from the sale of the LLC Units to Weber Inc. as follows: (i) to pay fees and expenses of approximately $             in connection with this offering and the Reorganization Transactions; (ii) to repay $             of the outstanding borrowings under our Secured Credit Facility and (iii) for general corporate purposes.

Weber HoldCo LLC will not receive any proceeds from purchase of LLC Units from certain Pre-IPO LLC Members by us or the repurchase of shares of Class A common stock by us.

 

  If the underwriters exercise their option to purchase additional shares of Class A common stock in full, we estimate that our additional net proceeds will be approximately $            . We will use the additional net proceeds we receive pursuant to any exercise of the underwriters’ option to purchase additional shares of Class A common stock to purchase LLC Units from certain Pre-IPO LLC Members and/or to repurchase shares of the Class A common stock received by the Blocker equityholders in connection with the merger of Weber Merger Sub, LLC with and into Blocker, in each case at a price per LLC Unit and share of Class A common stock equal to the initial public offering price of our Class A common stock minus underwriting discounts. As a result, Weber HoldCo LLC will not receive any additional proceeds from any exercise of the underwriters’ option to purchase additional shares of Class A common stock.

See “Use of Proceeds.”

 

Controlled Company

Upon the closing of this offering, entities controlled by BDT Capital Partners, LLC will beneficially own more than 50% of the voting power for the election of members of our board of directors and will enter into the Stockholders Agreement. Consequently, we will be a “controlled company” under the rules. As a controlled company, we qualify for, and intend to rely on, exemptions from certain corporate governance requirements of the NYSE. See “Management—Controlled company exception.”

 

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Tax Receivable Agreement

Pursuant to the Tax Receivable Agreement we expect to enter into with the Pre-IPO LLC Members, we will pay 85% of the amount of certain cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize to the Pre-IPO LLC Members as a result of (i) Weber Inc.’s allocable share of certain existing tax basis in tangible and intangible assets related to certain transactions that resulted in a step-up in Weber HoldCo LLC’s tax basis, (ii) any increase in tax basis in Weber-Stephen Products LLC’s assets resulting from (a) acquisitions by Weber Inc. of LLC Units from the Pre-IPO LLC Members in connection with this offering, (b) the acquisition of LLC Units from the Pre-IPO LLC Members using the net proceeds from any future offering, (c) future taxable redemptions or exchanges by the Pre-IPO LLC Members of LLC Units for shares of our Class A common stock or cash or (d) payments under the Tax Receivable Agreement and (iii) tax benefits related to imputed interest resulting from payments made under the Tax Receivable Agreement. Our obligations under the Tax Receivable Agreement will also apply with respect to any person who is issued LLC Units in the future and who becomes a party to the Tax Receivable Agreement. See “Organizational Structure—Holding company structure and the Tax Receivable Agreement.”

 

Dividend Policy

The declaration and payment by us of any future dividends to holders of our Class A common stock will be at the sole discretion of our board of directors. Our Class B common stock will not have any economic ownership of us and will not be entitled to cash dividends.

 

  Following this offering and subject to funds being legally available, we intend to cause Weber-Stephen Products LLC to make pro rata distributions to the Pre-IPO LLC Members and us in an amount at least sufficient to allow us and the Pre-IPO LLC Members to pay all applicable taxes, to make payments under the Tax Receivable Agreement we will enter into with the Pre-IPO LLC Members and to pay our corporate and other overhead expenses.

 

Risk Factors

See “Risk Factors” for a discussion of risks you should carefully consider before deciding to invest in our Class A common stock.

 

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Certain U.S. Federal Income and Estate Tax Consequences to Non-U.S. Holders

For a discussion of certain U.S. federal income and estate tax consequences that may be relevant to non-U.S. stockholders, see “Certain U.S. Federal Income and Estate Tax Consequences to Non-U.S. Holders.”

 

Proposed stock symbol

WEBR.

Unless we indicate otherwise throughout this prospectus, the number of shares of our Class A common stock outstanding after this offering excludes:

 

   

             shares of Class A common stock reserved for issuance upon the exchange of                  LLC Units that will be held by the Pre-IPO LLC Members;

 

   

             shares of Class A common stock reserved for issuance upon exchange of LLC Units issued in exchange for Profits Interests held by members of management indirectly through their interest in Weber-Stephen Management Pool LLC;

 

   

             shares of our Class A common stock issuable if the underwriters exercise their option to purchase additional shares of Class A common stock from us;

 

   

             shares of Class A common stock reserved for issuance under our Incentive Plan (as defined below). See “Compensation Discussion and Analysis—Long-Term Incentive Compensation—Omnibus Incentive Plan” for more information regarding our Incentive Plan and the IPO Grants (as defined below); and

 

   

             shares of Class A common stock reserved for issuance under our ESPP (as defined below). See “Compensation Discussion and Analysis—Long-Term Incentive Compensation—Employee Stock Purchase Plan” for more information regarding our ESPP.

Unless we indicate otherwise throughout this prospectus, all information in this prospectus reflects an initial public offering price of $         per share (the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus). Although the number of shares of Class A common stock being offered hereby to the public and the total number of shares of common stock issued to the Pre-IPO LLC Members and the Blocker equityholders in the Reorganization Transactions remain fixed regardless of the initial public offering price in this offering, certain share information presented in this prospectus will vary depending on the initial public offering price in this offering. For example, the relative allocation of the shares of Class B common stock (and corresponding LLC Units) issued in the Reorganization Transactions as among the Pre-IPO LLC Members will vary, depending on the initial public offering price in this offering.


 

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Summary Historical and Unaudited Pro Forma Consolidated Financial Data

The following tables present, as of the dates and for the periods indicated, (1) the summary historical consolidated financial data for Weber-Stephen Products LLC and its consolidated subsidiaries and (2) the summary unaudited pro forma consolidated financial data for Weber Inc. and its consolidated subsidiaries, including Weber-Stephen Products LLC. Weber-Stephen Products LLC is the predecessor of Weber Inc. for financial reporting purposes. Weber Inc. was formed as a Delaware corporation on April 1, 2021 and has not, to date, conducted any activities other than those incident to its formation, the Reorganization Transactions and the preparation of this prospectus and the registration statement of which this prospectus forms a part.

The summary consolidated statement of income data for the fiscal years ended September 30, 2018, 2019 and 2020 and summary consolidated balance sheet data as of September 30, 2019 and 2020 have been derived from Weber-Stephen Products LLC’s audited consolidated financial statements included elsewhere in this prospectus. The summary condensed consolidated statement of income data for the six months ended March 31, 2020 and 2021 (unaudited) and the summary condensed consolidated balance sheet data as of March 31, 2021 (unaudited) have been derived from Weber-Stephen Products LLC’s unaudited condensed consolidated financial statements included elsewhere in this prospectus which, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the unaudited interim periods.

The summary unaudited pro forma consolidated statement of income data for the fiscal year ended September 30, 2020 and the six months ended March 31, 2021 gives effect to the Pro Forma Transactions (which includes the Reorganization Transactions and this offering as more fully described in “Unaudited Pro Forma Consolidated Financial Information”) as if they had occurred on October 1, 2019.

The summary unaudited pro forma consolidated balance sheet data as of March 31, 2021 gives effect to the Pro Forma Transactions as if they had occurred on March 31, 2021. See “Unaudited Pro Forma Consolidated Financial Information” and “Capitalization.”


 

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The summary historical and unaudited pro forma consolidated financial data presented below do not purport to be indicative of the results that can be expected for any future period and should be read together with “Capitalization,” “Unaudited Pro Forma Consolidated Financial Information,” “Selected Historical Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes thereto included elsewhere in this prospectus. The presentation of the summary unaudited pro forma consolidated financial information is prepared in conformity with Article 11 of Regulation S-X. The Pro Forma Transactions include various estimates that are subject to material change and may not be indicative of what our operations or financial position would have been had this offering and related transactions taken place on the dates indicated, or that may be expected to occur in the future. See “Unaudited Pro Forma Consolidated Financial Information” for a complete description of the adjustments and assumptions underlying the summary unaudited pro forma consolidated financial data.

 

    Weber-Stephen Products LLC     Pro Forma Weber Inc.  
    Fiscal Year Ended September 30,     Six Months Ended
March 31,
    Fiscal Year
Ended

September 30,
2020
    Six Months
Ended
March 31,
2021
 
    2018     2019     2020     2020     2021  
(Dollars in thousands,
except share and per share
information)
        (Unaudited)     (Unaudited)  

Consolidated Statement of Income Data

             

Net sales

  $ 1,340,032     $ 1,296,210     $ 1,525,260     $ 596,376     $ 963,309     $                                   

Cost of goods sold(1)(2)

    759,786       793,536       915,586       358,417       542,782                       
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

    580,246       502,674       609,674       237,959       420,527      

Operating expenses:

             

Selling, general and administrative(1)(2)

    397,444       369,651       444,975       174,718       297,986      

Amortization of intangible assets

    11,786       13,586       13,235       6,855       6,864      

Impairment of assets

          12,568                        

Gain on disposal of assets held for sale

                            (5,185    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

    171,016       106,869       151,464       56,386       120,862      

Foreign currency loss (gain)

    7,118       (1,837     5,081       6,033       (14    

Interest income

    (1,594     (1,153     (1,270     (701     (425    

Interest expense

    34,609       45,170       40,357       21,111       32,174      

Loss from early extinguishment of debt

                            5,448      
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before taxes

    130,883       64,689       107,296       29,943       83,679      

Income taxes

    17,588       13,544       13,812       3,558       15,389      

Loss (gain) from investments in unconsolidated affiliates

          1,025       4,604       2,778       (5,505    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

    113,295       50,120       88,880       23,607       73,795      

Earnings allocated to participating securities

    (738     (320     (473     (234     (610    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to common members

  $ 112,557     $ 49,800     $ 88,407     $ 23,373     $ 73,185     $                  

 

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    Weber-Stephen Products LLC     Pro Forma Weber Inc.  
    Fiscal Year Ended September 30,     Six Months Ended
March 31,
    Fiscal Year
Ended

September 30,
2020
    Six Months
Ended
March 31,
2021
 
    2018     2019     2020     2020     2021  
(Dollars in thousands,
except share and per share
information)
        (Unaudited)     (Unaudited)  

Net income per common unit

             

Basic

  $ 193.53     $ 87.95     $ 160.23     $ 42.36     $ 132.62     $      

Diluted

  $ 193.53     $ 87.95     $ 160.23     $ 42.36     $ 132.62     $      

Weighted average common units outstanding

             

Basic

    581,616       566,223       551,763       551,753       551,836      

Diluted

    581,616       566,223       551,763       551,753       551,836      

Pro forma net income (loss) per share attributable to common stockholders(3)

             

Basic

            $                  

Diluted

            $                  

Weighted-average shares used in computing pro forma net income (loss) per share attributable to common stockholders(3)

             

Basic

             

Diluted

             

Consolidated Statement of Cash Flows Data:

             

Net cash provided by (used in) operating activities

  $ 110,648     $ 126,468     $ 305,178     $ (212,035   $ (214,649    

Net cash (used in) provided by investing activities

  $ (33,079   $ (67,257   $ (22,207   $ (18,226   $ (105,565    

Net cash (used in) provided by financing activities

  $ (204,179   $ (50,728   $ (213,240   $ 252,830     $ 571,266      

Additions to property, equipment and leasehold improvements

  $ (34,904   $ (25,507   $ (29,414   $ (18,264   $ (17,354    

Other Data:

             

Adjusted income from operations(4)

  $ 170,269     $ 143,778     $ 189,005     $ 58,281     $ 161,106      

Adjusted net income(4)

  $ 118,812     $ 77,862     $ 126,004     $ 30,592     $ 111,068      

EBITDA(4)

  $ 212,515     $ 153,998     $ 184,126     $ 69,047     $ 141,261      

Adjusted EBITDA(4)

  $ 218,886     $ 189,070     $ 226,748     $ 76,975     $ 186,939      

 

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     Weber-Stephen Products LLC      Pro Forma Weber Inc.  
     As of September 30,     As of March 31,
2021
     As of March 31,
2021
 
             2019                     2020          
(Dollars in thousands)                (Unaudited)     

(Unaudited)

 

Consolidated Balance Sheet Data:

         

Cash and cash equivalents

   $ 44,665     $ 123,792     $ 379,939     

Working (deficit) capital(5)

   $ (84,879   $ 45,023     $ 660,865     

Total assets

   $ 961,611     $ 1,139,435     $ 2,026,197     

Long-term debt, less current portion

   $ 594,035     $ 575,659     $ 1,210,560     

Total liabilities

   $ 1,083,371     $ 1,182,983     $ 1,999,483     

Total members’ (deficit) equity

   $ (121,760   $ (43,548   $ 26,714     

 

(1)

Amounts include unit-based compensation as follows:

 

     Fiscal Year Ended September 30,      Six Months Ended
March 31,
 
         2018             2019             2020             2020            2021     
     (Dollars in thousands)      (Unaudited)  

Cost of goods sold

   $ (138   $     $ 663      $ 65      $ 279  

Selling, general and administrative

     (952     (1,446     3,851        827        32,200  
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Total unit-based compensation

   $ (1,090   $ (1,446   $ 4,514      $ 892      $ 32,479  
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

 

(2)

Amounts include depreciation and amortization expense as follows:

 

     Fiscal Year Ended September 30,      Six Months Ended
March 31,
 
         2018              2019              2020             2020            2021     
     (Dollars in thousands)      (Unaudited)  

Cost of goods sold

   $ 22,066      $ 17,106      $ 15,697      $ 8,024      $ 6,457  

Selling, general and administrative

     14,765        15,625        13,415        6,593        7,007  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total depreciation and amortization expense

   $ 36,831      $ 32,731      $ 29,112      $ 14,617      $ 13,464  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(3)

See the unaudited pro forma consolidated statement of income in “Unaudited Pro Forma Consolidated Financial Information” for the description of the assumptions underlying the pro forma net income (loss) per share calculations.

(4)

We define adjusted income from operations and adjusted net income as income from operations and net income adjusted for non-cash stock compensation / Management Incentive Plan (“LTIP”) and profits interest expense, business transformation costs, operational transformation costs, impairment costs, debt refinancing and IPO costs, COVID-19 costs, gain on disposal of assets held for sale, and, in the case of adjusted net income, loss from early extinguishment of debt, net of the tax impact of such adjustments. Adjusted income from operations is also adjusted for foreign currency (loss) gain. Adjusted income from operations excludes loss from early extinguishment of debt, interest expense, net, income taxes and loss (gain) from investments in unconsolidated affiliates. We define EBITDA as net income before interest expense, net, income taxes, and depreciation and amortization. We define Adjusted EBITDA as net income before interest expense, net, income taxes, depreciation and amortization, adjusted for non-cash stock compensation / LTIP and profits interest expense, business transformation costs, operational transformation costs, impairment costs, debt refinancing and IPO costs, COVID-19 operational costs, loss from early extinguishment of debt, and gain on disposal of assets held for sale.

(5)

We define working (deficit) capital as current assets less current liabilities.


 

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Adjusted income from operations, adjusted net income, EBITDA and Adjusted EBITDA are not defined under U.S. GAAP and may not be comparable to similarly titled measures reported by other entities. We use these non-GAAP measures, along with U.S. GAAP measures, to evaluate our business, measure our performance, identify trends affecting our business and assist us in making strategic decisions. We believe these non-GAAP measures, when reviewed in conjunction with U.S. GAAP financial measures, and not in isolation or as substitutes for analysis of our results of operations under U.S. GAAP, are useful to investors as they are widely used measures of performance and the adjustments we make to these non-GAAP measures provide investors further insight into our profitability and additional perspectives in comparing our performance to other companies and in comparing our performance over time on a consistent basis.


 

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The following table reconciles income from operations to adjusted income from operations, net income to adjusted net income and net income to Adjusted EBITDA for the periods presented.

 

    Fiscal Year Ended
September 30,
    Six Months Ended
March 31,
 
    2018     2019     2020     2020     2021  
    (Dollars in thousands)              

Income from operations

  $ 171,016     $ 106,869     $ 151,464     $ 56,386     $ 120,862  

Adjustments:

         

Foreign currency (loss) gain(a)

    (7,118     1,837       (5,081     (6,033     14  

Non-cash stock compensation / LTIP and profits interest expense(b)

    (1,090     (1,446     4,514       892       32,479  

Business transformation costs(c)

    7,461       22,706       12,515       3,591       2,924  

Operational transformation costs(d)

          1,244       8,532       1,394       5,826  

Impairment costs(e)

          12,568                    

Debt refinancing and IPO costs(f)

                            3,706  

COVID-19 costs(g)

                17,061       2,051       480  

Gain on disposal of assets held for sale

                            (5,185
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted income from operations

  $ 170,269     $ 143,778     $ 189,005     $ 58,281     $ 161,106  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $ 113,295     $ 50,120     $ 88,880     $ 23,607     $ 73,795  

Adjustments:

         

Non-cash stock compensation / LTIP and profits interest expense(b)

    (1,090     (1,446     4,514       892       32,479  

Business transformation costs(c)

    7,461       22,706       12,515       3,591       2,924  

Operational transformation costs(d)

          1,244       8,532       1,394       5,826  

Impairment costs(e)

          12,568                    

Debt refinancing and IPO costs(f)

                            3,706  

COVID-19 costs(g)

                17,061       2,051       480  

Loss from early extinguishment of debt

                            5,448  

Gain on disposal of assets held for sale

                            (5,185

Tax impact of adjusting items

    (854     (7,330     (5,498     (943     (8,405
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income

  $ 118,812     $ 77,862     $ 126,004     $ 30,592     $ 111,068  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $ 113,295     $ 50,120     $ 88,880     $ 23,607     $ 73,795  

Adjustments:

         

Interest expense, net

    33,015       44,017       39,087       20,410       31,749  

Income tax expense

    17,588       13,544       13,812       3,558       15,389  

Depreciation and amortization

    48,617       46,317       42,347       21,472       20,328  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

  $ 212,515     $ 153,998     $ 184,126     $ 69,047     $ 141,261  

Non-cash stock compensation / LTIP and profits interest expense(b)

    (1,090     (1,446     4,514       892     $ 32,479  

Business transformation costs(c)

    7,461       22,706       12,515       3,591       2,924  

Operational transformation costs(d)

          1,244       8,532       1,394       5,826  

Impairment costs(e)

          12,568                    

Debt refinancing and IPO costs(f)

                            3,706  

COVID-19 costs(g)

                17,061       2,051       480  

Loss from early extinguishment of debt

                            5,448  

Gain on disposal of assets held for sale

                            (5,185
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

  $ 218,886     $ 189,070     $ 226,748     $ 76,975     $ 186,939  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a)

Adjusted income from operations includes foreign currency (loss) gain in order to align adjusted income from operations with Adjusted EBITDA, with the exception of depreciation and amortization and loss (gain) from investments in unconsolidated affiliates.

(b)

Our financial results reflect an increase in other long-term liabilities of approximately $30.0 million related to an increase in the value of our profits interest units as well as a change in accounting methodology from the intrinsic value method to the fair value method during the quarter ended March 31, 2021. These changes resulted in a selling, general and administrative expense of approximately $30.0 million for the six months ended March 31, 2021.


 

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(c)

“Business transformation costs” are defined as costs incurred typically during the earlier stages of the new leadership team’s tenure with Weber in order to transition the organization to the future operating structure. These costs include major business transformation initiatives that require severance or other unusual costs to transition to a new operating model.

(d)

“Operational transformation costs” are defined as restructuring and transformation initiatives related to major supply chain, operational moves and startups that are designed to enable future productivity. These costs also include significant systems integration costs, as well was plant shutdown and closure costs that will drive future efficiencies.

(e)

As part of our fiscal year 2019 annual goodwill impairment test, we recognized a non-cash impairment loss of $12.6 million on the iGrill goodwill.

(f)

“Debt refinancing and IPO costs” are defined as non-capitalizable costs from the refinancing of the Company’s term loan and costs related to the initial public offering.

(g)

During fiscal year 2020, the Company incurred a number of significant costs related to the global COVID-19 pandemic. These non-recurring costs included plant shutdown costs, the impact of enhanced employee safety and social distancing protocols as well as overtime and expedited freight costs to fulfill significant unexpected demand increases driven by stay-at-home orders in many of our key markets. These costs have begun normalizing in fiscal year 2021.


 

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RISK FACTORS

An investment in our Class A common stock involves a high degree of risk. You should carefully consider the following risks, as well as the other information contained in this prospectus, before making an investment in our Class A common stock. If any of the following risks actually occurs, our business, financial condition and results of operations may be materially adversely affected. In such an event, the trading price of our Class A common stock could decline and you could lose part or all of your investment.

Risks Related to Our Business

Risks Related to Our Operations and Industry

Our business depends on maintaining and strengthening our brand, as well as our reputation as a producer of high-quality goods, to maintain and generate ongoing demand for our products, and any harm to our brand could result in a significant reduction in such demand which could materially adversely affect our results of operations.

The “Weber” name and premium brand image are integral to the growth of our business, as well as to the implementation of our strategies for expanding our business. Our success depends on the value and reputation of our brand, which, in turn, depends on factors such as the quality, design, performance, functionality and durability of our products, the image of our e-commerce platform and retail partner floor spaces, our communication activities, including advertising, social media and public relations, and our management of the customer experience, including direct interfaces through customer service. Maintaining, promoting, and positioning our brand are important to expanding our customer base and will depend largely on the success of our marketing and merchandising efforts and our ability to provide consistent, high-quality consumer experiences. We intend to continue making substantial investments in these areas in order to maintain and enhance our brand, and such investments may not be successful. We have previously marketed our products, in part, by associating our brand and products with activities rooted in passion for grilling and outdoor cooking. To sustain long-term growth, we must continue to successfully promote our products to consumers who identify with or engage in these activities, as well as to individuals who simply value products of outstanding quality and design.

Ineffective marketing, negative publicity, product diversion to unauthorized distribution channels, product or manufacturing defects, counterfeit products, unfair labor practices, failure to protect the intellectual property rights in our brand and detrimental acts by third parties, including those who have obtained licenses to use the “Weber” name and trademarks in various capacities, including certain food products and food service companies, are potential threats to the strength of our brand, and those and other factors could rapidly and severely diminish customer confidence in us. Additionally, the growing use of social media increases the speed with which information and opinions can be shared and the speed with which a company’s reputation can be affected. If we fail to correct or mitigate misinformation or negative information, including information spread through social media or traditional media channels, about us, the products we offer, our customer experience, or any aspect of our brand, our business, sales and results of operations could be adversely impacted. Maintaining and enhancing our brand image in our current key markets, including the United States, Germany, Canada, Australia, the United Kingdom and France, and in new markets where we have limited brand recognition is important to expanding our customer base. If we are unable to maintain or enhance our brand in current or new markets, or if we fail to continue to successfully market and sell our products to our existing customers or expand our customer base, our growth strategy and results of operations could be harmed.

Additionally, independent third parties and consumers often review our products as well as those of our competitors. Perceptions of our offerings in the marketplace may be significantly influenced by

 

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these reviews, which are disseminated via various media, including the internet. If reviews of our products are negative, or less positive as compared to those of our competitors, our brand may be adversely affected and our results of operations materially harmed.

Our ability to understand consumers’ preferences and to timely identify, develop, manufacture, market and sell products that meet customer demand could significantly affect our business.

Our success is, in part, dependent on anticipating and appropriately reacting to changes in consumer preferences, including the shifting of consumer purchasing practices towards e-commerce, direct-to-consumer and other channels. Our success is also dependent on successful new product development undertaken in response to such changes, including in the outdoor cooking product space (e.g., our introduction of pellet cookers) and the digital space (e.g., our recent acquisition of June Life, a producer of smart ovens and developer of related software), as well related product launches and relaunches. Additionally, our success depends on consumers’ preferences regarding dining at home and consuming certain foods, including proteins. 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 product categories and geographic regions, and our ability to successfully identify, develop, manufacture, market, and sell new or improved products to address these changing environments. If we are unable to timely identify and respond to changes in consumer preferences, or if our competitors are able to do so before us, our business may be materially adversely affected.

Our results of operations could be materially harmed if we are unable to accurately forecast demand for our products and manage product inventory in an effective and efficient manner.

To ensure adequate inventory supply, we must forecast inventory needs and place orders with our manufacturers before firm orders are placed by our customers. If we fail to accurately forecast customer demand, we may experience excess inventory levels or a shortage of product to deliver to our customers. Factors that could affect our ability to accurately forecast demand for our products include: (a) an increase or decrease in consumer demand for our products; (b) a failure to accurately forecast consumer acceptance for our new products; (c) product introductions by competitors; (d) unanticipated changes in general market conditions or other factors, which may result in cancellations of advance orders or a reduction or increase in the rate of reorders or at-once orders placed by retailers; (e) the impact on consumer demand due to unseasonable weather conditions; (f) weakening of economic conditions or consumer confidence in future economic conditions, which could reduce demand for discretionary items, such as our products; (g) the uncertainties and logistical challenges that accompany operations on a global scale; and (h) terrorism or acts of war, or the threat thereof, or political or labor instability or unrest, civil unrest, riots or insurrections, public health crises such as the current COVID-19 pandemic (or other future pandemics or epidemics), which could adversely affect consumer confidence and spending or interrupt production and distribution of product and raw materials.

Inventory levels in excess of customer demand may result in inventory write-downs or write-offs, and the sale of excess inventory at discounted prices or in less preferred distribution channels, which could impair our brand image and harm our gross margin. In addition, if we underestimate the demand for our products, our contract manufacturers or our manufacturing plants may not be able to produce products to meet our customer requirements, and this could result in delays in the shipment of our products, therefore impacting our ability to recognize revenue, generate lost sales, and cause damage to our reputation and relationships with our consumers, retailers and distributors.

Challenges in forecasting demand, which we have encountered during the COVID-19 pandemic, can also make it difficult to estimate future results of operations and financial condition from period to period. A failure to accurately predict the level of demand for our products or manage product inventory

 

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in an effective and efficient manner could adversely impact our profitability or cause us not to achieve our expected financial results.

We may be unable to execute our business objectives and growth strategies successfully or sustain our growth, and as a result, our operating results may be adversely affected.

The highly competitive nature of our industry requires that we effectively execute and manage our business objectives and growth strategies. However, we may not be able to execute on these strategies as effectively as anticipated. Our ability to execute on these strategies depends on a number of factors, including, without limitation:

 

   

whether we have adequate capital resources to expand our product offerings or manufacturing capacity, and to build out our digital and data ecosystem and capabilities globally;

 

   

our ability to hire, train and retain skilled managers and personnel, including highly in-demand information technology professionals, product and software engineers and marketing and commercial specialists;

 

   

our ability to successfully increase our market share globally and expand into additional international markets, including certain markets in EMEA, Asia-Pacific, and Latin America, and manage the challenges associated therewith;

 

   

our ability to manage the financial and operational aspects of our Weber Stores and Weber Grill Academy growth strategy, including local retail operations;

 

   

our ability to successfully increase sales through our direct-to-consumer channels, which depends, in part, on our ability to develop strong e-commerce initiatives with content-rich and user-friendly websites and digital experiences that may be country and region-specific, and that comply with all applicable laws in those respective countries and regions; and

 

   

our ability to continue to upgrade and maintain our information systems, technology architecture, and other operating systems, to make safe and effective use of the data we collect through these systems to offer better products and services to our customers.

Our existing products and operating locations may not maintain their current levels of sales and profitability, and our growth strategies may not generate sales levels necessary to achieve profitability that is comparable to that of our existing products and locations. To the extent we are unable to execute on our growth strategies in accordance with our expectations, our sales growth would come primarily from the organic growth of existing product and service offerings.

The markets in which we compete are highly competitive, subject to pricing pressure and include numerous other brands and retailers that offer a wide variety of competitive products; if we fail to compete effectively, we could lose our market position.

The markets in which we compete are highly competitive. Numerous other brands and retailers offer a wide variety of products that compete with our grills and grilling accessories. Competition in these product markets is based on a number of factors including product quality, performance, durability, styling, brand image and recognition, and price. We believe that we have been able to compete successfully on the basis of our brand, superior design capabilities, product quality and durability, and innovative new product development, as well as on the breadth of our distribution channels, including independent specialty dealers, hardware and home improvement retailers, national and regional chains, online retailers and our growing direct-to-consumer channels. Our competitors may be able to develop and market higher-quality products that compete with our products, sell their products for lower prices, adapt to changes in consumers’ needs and preferences more quickly, devote greater resources to the design, sourcing, distribution, marketing, and sale of their products, or

 

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generate greater brand recognition than us. In addition, as we expand into new product categories, we have faced, and will continue to face, different and, in some cases, more formidable competition. Some of our competitors and potential competitors have significant competitive advantages, including lower price points or stronger reputations in niche areas, more established relationships with a larger number of suppliers and manufacturing partners, greater brand recognition, more effective brand ambassador and endorsement relationships, greater financial strength, larger research and development teams, significant intellectual property portfolios, larger marketing budgets or more distribution and other resources than we do. Some of our competitors may aggressively discount their products or offer other attractive sales terms in order to gain market share, which could result in pricing pressures, reduced profit margins, or lost market share. Further, consolidation in the retail industry and changes in consumer preferences are factors which may exert additional pressure on pricing in the markets in which we compete. If we are not able to overcome these potential competitive challenges, effectively market our current and future products, and compete effectively against our current or potential competitors, our prospects, results of operations, and financial condition could be harmed.

If our trademarks and trade names are not adequately protected, maintained and enforced, we may not be able to build and maintain name recognition in our markets of interest and our competitive position may be harmed.

Our applications for registration of trademarks in the U.S. and other countries may not be allowed for registration in a timely fashion or at all, and we may not be successful in the maintenance and enforcement of our existing registered trademarks. In addition, the registered or unregistered trademarks or trade names that we own may be challenged, infringed, circumvented, declared generic, lapsed or determined to be infringing on or dilutive of third-party marks. Further, opposition or cancellation proceedings may in the future be filed against our trademark applications and registrations, and our trademarks may not survive such proceedings. In the event that our trademarks are subject to challenges, determinations or oppositions, or if our trademarks are otherwise infringed or diluted, we may not be able to protect our rights in these trademarks and trade names, which we need in order to build name recognition.

Third parties have filed, and may in the future file, for registration of trademarks similar or identical to our trademarks, thereby impeding our ability to build brand identity and possibly leading to market confusion. Moreover, third parties may file first for similar or identical trademarks in certain countries. If they succeed in registering or developing common law rights in such trademarks, and if we are not successful in challenging such third-party rights, we may not be able to use these trademarks to develop brand recognition of our technologies, products or services. In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of our registered or unregistered trademarks or trade names. If we are unable to establish name recognition based on our trademarks and trade names, we may not be able to compete effectively and we could be forced to rebrand our products, which could result in loss of brand recognition, which could have a material adverse effect on our competitive position, business, financial condition, and results of operations.

Our results of operations are subject to significant fluctuations due to the impacts of both extreme weather events and unusual or poor weather patterns, which could cause a decrease in revenues and operating results.

Weather can be difficult to forecast far in advance. Variations in weather conditions across seasons and throughout the year may harm our quarterly results of operations. Extreme weather events, including, without limitation, hurricanes, tornados, floods, earthquakes and wildfires, and the effects thereof, may negatively impact our net sales, manufacturing operations or supply chain in the impacted regions. Additionally, unusual weather patterns, such as extended periods of unseasonably

 

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cold or hot temperatures, or heavier than normal precipitation levels during peak spring/summer months, could suppress consumer demand and negatively impact our net sales. We expect that weather will continue to affect our results of operations, sales and earnings.

Our results of operations are subject to seasonal and quarterly variations.

We expect our net sales to be highest in our second and third fiscal quarters, with the first fiscal quarter generating the lowest sales, as a result of our prevalence in Northern Hemisphere countries and higher grill purchase rates in late spring and summer. Our annual and quarterly results of operations may also fluctuate significantly as a result of a variety of other factors, including, among other things, the timing of the introduction of and advertising for our new products and those of our competitors, changes in our product mix, and the shifting dynamics of distributor and retailer trade inventories in products viewed as seasonal in nature.

As a result of these seasonal and quarterly fluctuations, as well as the unpredictable nature of weather, we believe that comparisons of our operational results between different quarters within a single fiscal year, or across different fiscal years, are not necessarily meaningful and that these comparisons cannot be relied upon as indicators of our future performance. In the event that any seasonal or quarterly fluctuations in our net sales and results of operations result in our failure to meet our forecasts or the forecasts of the research analysts that may cover us in the future, the market price of our common stock could fluctuate or decline.

Past growth may not be indicative of future growth.

Historically, we have experienced sales growth through organic market share gains, geographic expansion, technological innovation, new product offerings, increased demand for outdoor living products, including as a result of the COVID-19 pandemic, and acquisitions that have increased our size, scope, and geographic footprint. Our various business strategies and initiatives, including our growth initiatives, are subject to business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In the future, we may not be able to:

 

   

acquire new customers, retain existing customers or grow or maintain our share of our current key markets, including the United States, Germany, Canada, Australia, the United Kingdom and France;

 

   

penetrate new markets;

 

   

identify and develop new products that meet the demand of rapidly evolving consumer expectations;

 

   

generate sufficient cash flows to support expansion plans and general operating activities;

 

   

obtain financing for our growth initiatives, including acquisitions;

 

   

identify suitable acquisition candidates and successfully integrate acquired businesses;

 

   

maintain favorable supplier and customer arrangements and relationships;

 

   

maintain consumer satisfaction and retention; and

 

   

identify and divest assets that do not continue to create value consistent with our objectives.

In addition, the COVID-19 pandemic could exacerbate these risks. If we are not able to manage these potential difficulties successfully in order to continue to compete in our markets and grow our business, our sales, overall financial condition, results of operations and cash flows could be adversely affected.

 

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The COVID-19 pandemic and associated responses could adversely impact our business, operations, financial condition, results of operations or cash flows.

Our business, operations, financial condition, results of operations, or cash flows could be negatively impacted by the COVID-19 pandemic and associated responses in the future.

Early in the pandemic, some of our suppliers faced operational challenges due to regional lockdown or quarantine regulations, which resulted in some interruptions in the shipping of certain finished goods or components. This negatively affected our production capabilities in the second quarter of fiscal year 2020. In addition, our manufacturing plant in Huntley was closed for a three-week period during April 2020 until we demonstrated to the Illinois Department of Commerce and Economic Opportunity that Weber met the definition of an Essential Business and, more importantly, had established safety protocols that met or exceeded state regulations. During the third fiscal quarter, we secured secondary sources of supply and added additional shifts at the Huntley facility such that we were able to return production to full capabilities. Continued restrictions and disruption across key elements of our supply chain, including logistics, the acquisition of raw materials and certain electronic components and labor availability, had an impact on our profitability. In fiscal year 2021, our supply chain and operations has resumed “normal” operations. However, if the COVID-19 pandemic worsens, we could experience further supply chain disruptions or delays that could have a material impact on our business. Moreover, if additional shut-down orders are issued in the future due to the COVID-19 pandemic, our ability to operate as an Essential Business could be altered, depending on the language of such orders.

The COVID-19 pandemic caused a sustained global economic slowdown of varying durations across different industries, and it is possible that it could still cause a global recession. Deteriorating economic and political conditions caused by the COVID-19 pandemic, such as increased unemployment, decreased capital spending, declines in consumer confidence, or economic slowdowns or recessions, could cause a decrease in demand for our products. In addition, a prolonged or worsened COVID-19 pandemic could lead to the shutdown or material reduction of grill manufacturing, repair and replacement as well as a reduction in residential construction and remodeling activity, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. While we have experienced higher demand in our grill business as consumers sheltered in place and have spent more time at home as a result of the COVID-19 pandemic, such growth may not be sustainable and may not be repeated in future periods. Furthermore, even if growth in demand continues, we may not be able to meet that demand due to production and capacity challenges.

The severity, magnitude and duration of the current COVID-19 pandemic is uncertain, rapidly changing and hard to predict. We may not be able respond to the impacts of the COVID-19 pandemic on a timely basis to prevent near- or long-term adverse impacts to our results of operations. Any negative impact on our business, financial condition, results of operations and cash flows cannot be reasonably estimated at this time, but the COVID-19 pandemic could lead to extended disruption of economic activity and the impact on our business, financial condition, results of operations and cash flows could be material.

Our net sales and profitability depend on the level of consumer spending for our products, which is sensitive to general economic conditions and other factors that affect global markets; during a downturn in the economy, consumer purchases of discretionary items are affected, which could materially harm our sales, profitability, and financial condition.

Our products are discretionary items for consumers. Therefore, our business depends on the strength of the retail, commercial and industrial sectors of the economy in various parts of the world, and trends therein, primarily in North America, Europe and Australia/New Zealand, and to a lesser

 

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extent the rest of the Asia-Pacific region and Latin America. There are many factors that influence consumer spending, including actual and perceived economic conditions, consumer confidence, disposable consumer income, consumer credit availability, unemployment and tax rates in the markets where we sell our products. Consumers also have discretion as to where to spend their disposable income and may choose to purchase other items or services if we do not continue to provide authentic, compelling and high-quality products at appropriate price points. Consumer preferences may shift with regard to environmental, health or sustainability concerns, and as those concerns receive greater attention, consumers may shift demand away from gas, charcoal, or pellet fueled grills to other cooking alternatives. As global economic conditions continue to be volatile and economic uncertainty persists, trends in consumer discretionary spending may also remain unpredictable and subject to declines. Any of these factors could harm discretionary consumer spending, resulting in a reduction in demand for our premium products, decreased prices, and harm to our business and results of operations. Moreover, consumer purchases of discretionary items tend to decline during recessionary periods when disposable income is lower or during other periods of economic instability or uncertainty, which may slow our growth more than anticipated. A downturn in the individual economies in markets where we sell our products, particularly in the United States, Germany, Canada, Australia, the United Kingdom and France, may materially harm our sales, profitability, and financial condition. For example, the lasting adverse effects of COVID-19 across geographies could lead to a decline in discretionary spending by consumers, resulting in a reduction in demand for our products, and in turn may materially impact our sales, profitability and financial condition.

We face risks associated with our acquisitions, divestitures and other strategic activities.

From time to time, we make acquisitions, divestitures and other strategic investments and participate in joint ventures. We engage in such strategic transactions where we identify advantageous opportunities in connection with businesses, products, or technologies that we believe could complement or expand our business, enhance our capabilities, or otherwise offer growth opportunities. For example, we recently acquired both June Life, a producer of smart ovens and developer of related software, and substantially all of the assets of R. McDonald Co., the company that was formerly managing our operations in Australia and New Zealand as a contracted third party.

We may engage in the issuance of dilutive equity securities, the incurrence of debt or the use of cash to fund such transactions. These transactions, and other transactions that we have entered into or which we may enter into in the future, can involve significant challenges and risks, including that the transaction does not advance our business strategy or fails to produce a satisfactory return on our investment. We have encountered and may encounter difficulties in integrating acquisitions with our operations, undertaking post-acquisition restructuring activities, applying our internal control processes to these acquisitions, managing strategic investments, and in overseeing the operations, systems and controls of acquired companies. Integrating acquisitions, managing combined businesses and carving out divestitures are often expensive, may involve unanticipated costs or liabilities and may require significant attention from management. We may not realize the degree, or timing, of benefits or synergies we anticipate when we first enter into a transaction. Additionally, following such a transaction, we may struggle to retain our or an acquired business’ key employees.

While our evaluation of any potential transaction includes business, legal and financial due diligence with the goal of identifying and evaluating the material risks involved, our due diligence reviews may not identify all of the issues necessary to accurately estimate the cost and potential loss contingencies of a particular transaction, including potential exposure to regulatory sanctions resulting from an acquisition target’s previous activities or costs associated with any quality issues with an acquisition target’s legacy products. In addition, certain liabilities may be retained by Weber when closing a facility, divesting an entity or selling physical assets, and such liabilities may be material. Further, there may be breaches of the representations or warranties or other violations of the

 

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contractual obligations required by the acquisition agreement of other parties to the acquisition transaction and any contractual remedies related thereto may not adequately protect or compensate us. A significant portion of the purchase price of companies we acquire may be allocated to acquired goodwill and other intangible assets, which must be assessed for impairment at least annually. In the future, if our acquisitions do not yield expected returns, we may be required to take charges to our results of operations based on this impairment assessment process, which could harm our results of operations.

A deterioration in labor relations could adversely impact our global business.

We are subject to separate collective bargaining agreements with certain labor unions in the United States, including with respect to employees in our Huntley, Illinois and Palatine, Illinois facilities, and works councils in Europe, as well as various other commitments regarding our workforce. We periodically negotiate with such unions and works councils representing our employees and may be subject to union campaigns, work stoppages and other potential labor disputes. At routine intervals, we renegotiate these collective bargaining agreements and may be unable to renew these collective bargaining agreements on the same or similar terms, or at all. Further, we may be subject to work stoppages at our suppliers or customers that are beyond our control. A deterioration in labor relations may have a material adverse effect on our business and financial condition.

We rely on information technology systems to support our business operations. A significant disruption or breach of our technological infrastructure, or the technological infrastructure of our vendors or others with which we do business or rely on, could adversely affect our financial condition and results of operations. Additionally, failure to maintain the security of proprietary, personal, sensitive or confidential information could damage our reputation and expose us to litigation.

Information technology supports several aspects of our business, including, among others, supply, pricing, customer service and communication, distribution and transportation, transaction processing, financial reporting, collections and cost management. In addition, we expect our reliance on information technology systems to increase as we continue to develop connected products, connected devices, and other consumer-facing technology solutions, such as our Weber Grills App, Weber Connect App, Weber iGrill App, Weber Connect Cloud Infrastructure and our websites. As a result, our ability to operate effectively on a day-to-day basis and accurately report our results depends on a solid technological infrastructure, which is inherently susceptible to internal and external threats. We are vulnerable to interruption and breakdown by fire, natural disaster, power loss, telecommunication failures, internet failures, security incidents, and other catastrophic events.

Advances in computer and software capabilities, encryption technology, and other discoveries increase the complexity of our technological environment, including how each interacts with our various software platforms. Such advances could delay or hinder our ability to process transactions or could compromise the integrity of our data, resulting in a material adverse impact on our financial condition and results of operations. The risk of system disruption is increased when significant system changes are undertaken. If we fail to timely integrate and update our information technology systems and processes, we may fail to realize the cost savings or operational benefits anticipated to be derived from these initiatives. We also may experience occasional system interruptions and delays that make our information technology systems unavailable or slow to respond, including the interaction of our information technology systems with those of third parties. A lack of sophistication or reliability of our information technology systems could adversely impact our operations and consumer service and could require major repairs, replacements or remodels, resulting in significant costs and foregone sales.

 

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Cybersecurity threats, which include hackers, computer viruses, spyware, ransomware and malware, unauthorized attempts to access information, physical or electronic break-ins, phishing schemes, social engineering, denial of service attacks, human error or malfeasance, fraud or malice on the part of employees or third parties (including state-sponsored organizations with significant financial and technological resources), terrorism or acts of war, political protests and other electronic security breaches, are persistent and evolve quickly, and we have in the past and may in the future experience such cybersecurity threats. Such threats have increased in frequency, scope, and potential impact in recent years because of the proliferation of new technologies and the increased number, sophistication and activities of perpetrators of cyberattacks. We and others are also subject to increased cybersecurity threats and potential breaches because of the increase in the number of individuals working from home as a result of the COVID-19 pandemic. Since the techniques used to obtain unauthorized access to or to sabotage information technology systems change frequently and are often not recognized until after they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. The accidental or willful security breaches or other unauthorized access by third parties to our information technology systems or facilities, or those of our vendors and/or others with which we do business or rely on, or the existence of computer viruses in our or their data or software, and/or any other failure of our or their information technology systems could expose us to a risk of information loss, the misappropriation of proprietary, personal, sensitive and confidential information, work stoppages, disruptions, and/or the defective manufacture or defective design of our products, which could expose us to liability. Any theft, misuse, unauthorized or inadvertent disclosure, manipulation or destruction of this information could result in, among other things, unfavorable publicity, damage to our reputation, difficulty in marketing our products, allegations by our customers that we have not performed our contractual obligations, indemnification obligations, regulatory investigations, fines or penalties, litigation or other claims by affected parties and possible financial obligations for liabilities and damages related to the theft or misuse of this information, any of which could have an adverse effect on our business, financial condition, results of operations, reputation, and relationships with our customers and suppliers. Further, we could be forced to expend significant financial and operational resources in response to a security breach, including repairing system damage, increasing security protection costs by deploying additional personnel and modifying or enhancing our protection technologies, investigating and remediating any information security vulnerabilities and defending against and resolving legal and regulatory claims, all of which could divert resources and the attention of our management and key personnel away from our business operations and adversely affect our business, financial condition and results of operations.

Risks Related to the Manufacturing, Supply and Distribution of Our Products

We depend on suppliers, including single-source suppliers and, in a few cases, sole-source suppliers, to consistently supply us with finished goods, raw materials and components for our products, and any failure to procure such finished goods, raw materials and components could have a material adverse effect on our business, product inventories, sales and profit margins. Additionally, if our independent suppliers and manufacturing partners do not comply with ethical business practices or with applicable laws and regulations, our reputation, business, and results of operations could be harmed.

We use a wide range of materials and components in the global production of our products, which come from numerous suppliers around the world. Our suppliers (and those they depend upon for materials and services) are subject to risks, including supplier plant shutdowns or slowdowns, labor disputes or constraints, union organizing activities, intellectual property claims, financial liquidity, information technology failures, inclement weather, natural disasters, significant public health and safety events, supply constraints, and general economic and political conditions that could limit their ability to provide us with materials. Insurance for certain disruptions may not be available, affordable or

 

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adequate. The effects of climate change, including extreme weather events, long-term changes in temperature levels and water availability may exacerbate these risks. Such disruption has in the past and could in the future interrupt our ability to manufacture certain products. Any significant disruption could negatively impact our financial statements.

While we have manufacturing and supply agreements with our most strategic and critical suppliers, with most of our suppliers, we place purchase orders on an as-needed basis. Because not all of our business arrangements provide for guaranteed supply and some key parts may be available only from a single supplier or a limited group of suppliers, we are subject to supply and pricing risk. Our suppliers could discontinue the manufacturing or supply of these components at any time. We carry safety stocks within our inventory, but do not carry a significant inventory of these components that could cover every potential supply constraint. Our suppliers may not be able to meet our demand for their products, either because of acts of nature, the nature of our agreements with those manufacturers or our relative importance to them as a customer, and our manufacturers may decide in the future to discontinue or reduce the level of business they conduct with us. We might not be able to identify and obtain additional or replacement suppliers for any of these components quickly or at all or without incurring significant additional costs. We cannot guarantee that we will be able to establish alternative relationships on similar terms, without delay or at all. In addition, we rely on single-source suppliers for certain types of parts in our products, and, in a few cases, on sole-source suppliers. A single-source supplier is a supplier from which we make all purchases of a particular component used in our products even though other suppliers of the component exist. A sole-source supplier is a supplier from which we make all purchases of a particular component used in our product, and the supplier is the only source of that particular component in the market. Establishing additional or replacement suppliers for any of these materials or components, if required, or any supply interruption from our suppliers, could limit our ability to manufacture our products, result in production delays and increased costs and adversely affect our ability to deliver products to our customers on a timely basis or at all. If we are not able to identify alternate sources of supply for the components, we might need to modify our product to use substitute components, which could cause delays in shipments, increase design and manufacturing costs and increase prices for our products. Any such modified product might not be as effective as the predecessor product or might not gain market acceptance. This could lead to customer or consumer dissatisfaction and damage to our reputation and could materially and adversely affect our business, product inventories, sales and profit margins.

Additionally, our reputation and our consumers’ willingness to purchase our products depend in part on our suppliers’, manufacturers’, and retail partners’ compliance with ethical employment practices, such as with respect to child labor, wages and benefits, forced labor, discrimination, safe and healthy working conditions, and with all legal and regulatory requirements relating to the conduct of their businesses. We do not exercise control over our suppliers, manufacturers, and retail partners and cannot guarantee their compliance with ethical and lawful business practices. Additionally, our internal audits of our suppliers, manufacturers, and retail partners may not uncover all instances of noncompliance with such practices and our own stringent policies and standards. If our suppliers, manufacturers, or retail partners fail to comply with applicable laws, regulations, safety codes, employment practices, human rights standards, quality standards, environmental standards, production practices, or other obligations, norms, or ethical standards, our reputation and brand image could be harmed, and we could be exposed to litigation and additional costs that would harm our business, reputation, and results of operations.

 

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Because we rely on foreign suppliers and we sell products in foreign markets, we are susceptible to numerous international business risks that could increase our costs or disrupt the supply of our products.

Our international operations subject us to risks, including:

 

   

economic and political instability, including international conflicts, acts of terrorism, war and the threat thereof;

 

   

fluctuations in the currency exchange rates;

 

   

restrictive actions by foreign governments, including those with respect to tariffs or trade policies;

 

   

changes in tariffs, import duties or import or export restrictions;

 

   

required compliance with anti-corruptions laws, including the Foreign Corrupt Practices Act, which may require extensive measures in certain markets;

 

   

timely shipping of product and unloading of product, including the timely rail/truck delivery to our warehouses and/or a customer’s warehouse of our products;

 

   

impacts of extreme weather events or trends that are more prevalent in particular geographic regions;

 

   

opportunity costs and reputational damage related to the presence of counterfeit versions of the Company’s products in such foreign markets;

 

   

greater difficulty enforcing intellectual property rights and weaker laws protecting intellectual property rights;

 

   

complications in complying with the laws and policies of the United States affecting the importation of goods, including tariffs, duties, quotas and taxes;

 

   

required compliance with U.S. laws that impact the Company’s operations in foreign jurisdictions that do not impact local operating companies; and

 

   

complications in complying with trade laws, embargoes and economic sanctions, foreign tax laws and other regulatory standards and requirements.

Further, the impact of the decision of the United Kingdom to withdraw from the European Union may cause the value of several European currencies, including the euro, to fluctuate, which may adversely affect our non-U.S. dollar sales and earnings. The emergence of any other international geopolitical or trade disputes could exacerbate the various risks that our international presence makes us susceptible to. As we are developing manufacturing operations in Poland, a significant disruption of the political or financial systems there could put these manufacturing operations at risk, which could ultimately adversely affect our profitability or operating results.

In addition to suppliers, we rely on our own production and manufacturing facilities; if we fail to timely and effectively obtain shipments of products from our manufacturing facilities and deliver products to our retail partners and customers, our business and results of operations could be harmed.

Our business depends on our ability to source raw material and components, manufacture our finished goods and distribute products in a timely manner. However, we cannot control all of the factors that might affect the timely and effective procurement of such raw material and components from our third-party suppliers, manufacture of our finished goods and the delivery of our products to our retail partners and customers.

 

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Globally, we operate 22 distribution facilities in our key markets and supplement our distribution network by engaging distribution partners in certain markets, particularly in EMEA and Asia-Pacific. Certain of our facilities play key roles in our distribution network. Specifically, we operate in a leased warehouse located in Huntley, Illinois which we have referred to as our Global Distribution Center (“GDC”). This facility distributes our products to Weber affiliates worldwide but is most critical to the direct distribution of our products to our customers located in the United States, Canada and Mexico. We are currently constructing an additional manufacturing and distribution center in Zabrze, Poland which we expect will serve a critical role in our operations in EMEA, similar to the role the GDC plays in our service of the U.S., Canadian and Mexican markets. Our reliance on a small number of key geographical locations for our principal manufacturing and distribution centers makes us more vulnerable to natural disasters, weather-related disruptions, accidents, system failures, public health issues such as the current COVID-19 pandemic (or other future pandemics or epidemics), and other unforeseen events that could delay or impair our ability to manufacture our finished goods, fulfill retailer orders and/or ship merchandise, which could harm our sales and results of operations.

We import certain raw materials and components, and we are also vulnerable to risks associated with manufacturing abroad, including, among other things: (a) risks of damage, destruction, or confiscation of products while in transit to our distribution centers; (b) foreign currency fluctuations; (c) the effects of international and regional geopolitical dynamics, instability and conflicts; and (d) transportation and other delays in shipments, including as a result of heightened security screening, port congestion, and inspection processes or other port-of-entry limitations or restrictions in the United States. Failure to procure our inputs from our third-party suppliers and manufacture and deliver merchandise to our retail partners and direct-to-consumer channels in a timely, effective, and economically viable manner could reduce our sales and gross margins, damage our brand, and harm our business. Further, the construction of our Zabrze facility is a large undertaking and we have not, in the recent past, opened a new facility of this scale. Any delays in the completion and integration of the Zabrze facility, cost overruns in connection with its construction or complications with respect to transitioning a significant portion of our regional operations from a model in which we contracted with third-party manufacturers and distributors to one in which such operations are conducted in-house in Zabrze, could materially increase our cost of goods sold and similarly reduce our gross margins and harm our business.

As current tariffs are implemented, or if additional tariffs or other restrictions are placed on foreign imports or any related countermeasures are taken by other countries, our business and results of operations could be harmed.

Recently, the United States has put in place higher tariffs and other trade restrictions and signaled that it may additionally alter trade agreements and terms between the United States and China, the European Union, Canada, and Mexico, among others, including limiting trade and/or imposing tariffs on imports from such countries. In addition, China, the European Union, Canada, and Mexico, among others, have either threatened or put into place retaliatory tariffs of their own. As announced tariffs are implemented, or additional tariffs or other restrictions are placed on foreign imports, including on any of our products manufactured overseas for sale in the United States, or any related countermeasures are taken by other countries, our business and results of operations may be materially harmed. Additionally, tariffs on foreign imports of raw materials and components for our products may cause domestic U.S. suppliers to opportunistically take price increases, which may impact our profitability.

Current and additional tariffs have the potential to significantly raise the absolute and relative cost of our products compared with those of our competitors, particularly our finished goods and certain components. Additionally, disparities in the application of tariffs across product categories and based upon the location of manufacturing operations could place us at a competitive disadvantage and

 

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detrimentally affect or business and results of operations. For example, differing tariff regimes may be applied across product categories and depending on whether (a) finished goods are imported from abroad or (b) raw materials and components are domestically assembled into finished goods. In such cases, there can be no assurance that we will be able to shift manufacturing and supply agreements to non-impacted countries, including the United States, to reduce the effects of the tariffs. As a result, we may suffer margin erosion or be required to raise our prices, which may place us at a competitive disadvantage, result in the loss of customers, negatively impact our results of operations or otherwise harm our business. In addition, the imposition of tariffs on products that we export to international markets could make such products more expensive compared to those of our competitors if we pass related additional costs on to our customers, which may also result in the loss of customers, negatively impact our results of operations, or otherwise harm our business.

Exchange rate fluctuations could adversely affect our financial condition, results of operations and cash flows.

We incur currency transaction risk whenever we enter into either a purchase or sale transaction using a currency other than the local currency of the transacting entity. We conduct business in various locations throughout the world and are subject to market risk due to changes in value of foreign currencies in relation to our reporting currency, the U.S. dollar. Periodically, we use derivative financial instruments to manage these risks. The functional currencies of our foreign operating locations are generally the local currency in the country. We manage these operating activities at the local level and net sales, costs, assets and liabilities are generally denominated in local currencies, thereby mitigating the risk associated with changes in foreign exchange. However, our results of operations and assets and liabilities are reported in U.S. dollars and thus will fluctuate with changes in exchange rates between such local currencies and the U.S. dollar. Furthermore, the sales of inventory between U.S. and foreign locations are often denominated in currencies other than the U.S. dollar, which generates additional risk. While we engage in hedging activities in order to mitigate our exposure, we may incur costs in connection with such activities and we may not be successful in hedging our exposure.

The Company’s financial instruments that can be affected by foreign currency fluctuations and exchange risks consist primarily of cash and cash equivalents, trade receivables, trade payables, and net sales denominated in currencies other than the U.S. dollar. For fiscal year 2020, approximately 47% of our net sales were denominated in a currency other than our functional U.S. dollar currency. These sales were primarily transacted in euros, Australian dollars, Canadian dollars and British pounds. Consequently, we are exposed to the impact of exchange rate volatility between the U.S. dollar and these currencies. To hedge against this risk, we enter into foreign currency forward exchange contracts to protect our U.S. trade receivable positions with our foreign operations.

We expect that the amount of our sales denominated in non-dollar currencies may increase in future periods. Given the volatility of exchange rates, there can be no assurance that we will be able to effectively manage our currency transaction risks or that any volatility in currency exchange rates will not have a material adverse effect on our financial condition or results of operations. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Quantitative and Qualitative Disclosures about Market Risk.”

Additionally, because our consolidated financial results are reported in U.S. dollars, the translation of sales or earnings generated in other currencies into U.S. dollars can result in a significant increase or decrease in the amount of those sales or earnings in our financial statements, which also affects the comparability of our results of operations and cash flows between financial periods. Further, currency fluctuations may negatively impact our debt service requirements, which are primarily in U.S. dollars.

 

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Fluctuations in the cost and availability of raw materials, equipment, labor and transportation could cause manufacturing delays or increase our costs.

The price and availability of key raw materials and components used to manufacture our products, including aluminum ingot, carbon steel, enameling iron, stainless steel, certain plastic materials, certain electronic components and various engineered coating materials as well as manufacturing equipment and molds, may fluctuate significantly. Additionally, the cost of logistics and transportation fluctuates in large part due to the price of oil, currency fluctuations, and global demand trends. Any fluctuations in the cost and availability of any of our raw materials or other sourcing or transportation costs related to our raw materials or products could harm our gross margins and our ability to meet customer demand. If we are unable to successfully mitigate a significant portion of these product cost increases or fluctuations, our results of operations could be harmed.

A significant portion of our sales are to large, multi-national retail partners. If these retail partners cease to carry our current products, choose not to carry new products that we develop or cease operations altogether, our brand as well as our results of operations and financial condition could be harmed. Additionally, we depend on these retail partners to display and present our products to consumers, and our failure to maintain and further develop our relationships with our retail partners could harm our business.

For fiscal years 2019 and 2020, approximately 37% and 39%, respectively, of our net sales were made to large, multi-national retail partners. For fiscal years 2019 and 2020, our top national retail partner accounted for approximately 14% and 16% of our net sales, respectively. Our retail partners service consumers by stocking and displaying our products, explaining our product attributes, and sharing our brand story. Our relationships with these retail partners are important to the authenticity of our brand and the marketing programs we continue to deploy. Our failure to maintain these relationships with our retail partners or financial difficulties experienced by these retail partners could harm our business. These retail partners may decide to emphasize products from our competitors, to redeploy their retail floor space to other product categories, or to take other actions that reduce their purchases of our products. We do not receive long-term purchase commitments from our retail partners, and orders received from these retail partners are cancelable. Factors that could affect our ability to maintain or expand our sales to these retail partners include: (a) failure to accurately identify the needs of our customers; (b) a lack of customer acceptance of new products or product expansions; (c) unwillingness of our key retail partners and customers to attribute premium value to our new or existing products or product expansions relative to competing products; (d) failure to obtain floor space from our retail partners; (e) new, well-received product introductions by competitors; (f) damage to our relationships with key retail partners due to brand or reputational harm; (g) delays or defaults on our retail partners’ payment obligations to us; and (h) store closures, decreased foot traffic, recession or other adverse effects resulting from public health crises such as the current COVID-19 pandemic (or other future pandemics or epidemics).

We cannot assure you that our current retail partners will continue to carry our current products, carry any new products that we develop or continue to operate. And if we lose any of our key retail partners or any key retail partner reduces its purchases of our existing or new products or its number of stores or operations or promotes products of our competitors over ours, our sales would be harmed. Because we are a premium brand, our sales depend, in part, on retail partners effectively displaying our products, including providing attractive space in their stores, and training their sales personnel to sell our products. If our retail partners reduce or terminate those activities, we may experience reduced sales of our products, resulting in lower gross margins, which would harm our results of operations. If these risks occur, they could harm our brand as well as our results of operations and financial condition. In addition, store closures, decreased foot traffic and recession resulting from the COVID-19

 

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pandemic will adversely affect the performance and will likely adversely affect the financial condition of many of these customers. The foregoing would be expected to have a material adverse effect on our business and financial condition.

Product manufacturing disruptions, at our own facilities and those of our suppliers, including as a result of catastrophic and other events beyond our control, could cause us to be unable to meet customer demands or increase our costs.

If operations at any of our manufacturing facilities, or the facilities of our supply chain partners, were to be disrupted as a result of significant equipment failures, natural or man-made disasters, earthquakes, power outages, fires, explosions, terrorism, adverse or extreme weather conditions, labor disputes, public health epidemics or other catastrophic events or events outside of our control, we may be unable to fill customer orders and otherwise meet customer demand for our products. In addition, these types of events may negatively impact residential, commercial and industrial spending in impacted regions or, depending on the severity, globally. As a result, any of such events could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Interruptions in production, in particular at our manufacturing facilities, could increase our costs and reduce our sales. Any interruption in production capability could require us to make substantial capital expenditures to fill customer orders. While we maintain property damage insurance, as well as business interruption insurance to mitigate losses resulting from any production interruption or shutdown caused by an insured loss, any recovery under our insurance policies may not offset the lost sales or increased costs that may be experienced during the disruption of operations, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Disruptions in our supply chain and other logistical factors affecting the distribution of our merchandise could adversely impact our business.

A disruption within our logistics or supply chain network could adversely affect our ability to deliver inventory in a timely manner, which could impair our ability to meet customer demand for products and result in lost sales, increased supply chain costs, or damage to our reputation. Such disruptions may result from damage or destruction to our distribution or fulfillment centers; weather-related events; natural disasters; international trade disputes or trade policy changes or restrictions; tariffs or import-related taxes; third-party strikes, lock-outs, work stoppages or slowdowns; shortages of supply chain labor, including truck drivers; shipping capacity constraints, including shortages of related equipment; third-party contract disputes; supply or shipping interruptions or costs, including the blockage of key shipping channels; military conflicts; acts of terrorism; public health issues, including pandemics or quarantines (such as the COVID-19 pandemic) and related shutdowns, reopenings, or other actions by the government; civil unrest; or other factors beyond our control. As a result of these disruptions, we have in the past chosen, and may choose in the future, to arrange for additional quantities of affected products, if available, to be delivered through air freight, which is significantly more expensive than standard shipping by sea and, consequently, could harm our gross margins.

We also rely on the timely and free flow of goods through open and operational ports from our suppliers. Labor disputes or disruptions at ports, our common carriers, or our suppliers could create significant risks for our business, particularly if these disputes result in work slowdowns, lockouts, strikes, or other disruptions during periods of significant importing or manufacturing, potentially resulting in delayed or canceled orders, unanticipated inventory accumulation or shortages, and harm to our business, results of operations, and financial condition. In recent years, global ports, particularly those located on the West Coast of the U.S., China and certain European locations, have been impacted by capacity constraints, port congestion and delays, periodic labor disputes, security issues, weather-related events, and natural disasters, which have been further exacerbated by the pandemic.

 

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Disruptions to our supply or distribution chains due to any of the factors listed above could negatively impact our financial performance or financial condition.

Insolvency, credit problems or other financial difficulties that could confront our customers and retail partners could expose us to financial risk.

We sell to the large majority of our retail partners on open account terms and do not require collateral or a security interest in the inventory we sell them. Consequently, the majority of our accounts receivable with our retail partners are unsecured. Insolvency, credit problems, or other financial difficulties confronting our customers and retail partners could expose us to financial risk. These actions could expose us to risks, including increases in our bad debt expense, if they are unable to pay for the products they purchase from us. Financial difficulties of our customers and retail partners could also cause them to reduce their sales staff, use of attractive displays, number or size of stores, and the amount of floor space dedicated to our products. For example, the COVID-19 pandemic caused public health officials to recommend precautions to mitigate the spread of the virus that resulted in widespread temporary store closures or reduced store hours for our retail partners during the second and third fiscal quarters of 2020. Significant uncertainty about the ultimate duration and severity of the spread of COVID-19, uncertainties regarding consumer willingness to visit retail stores during the COVID-19 pandemic and in the future, and the overall economic impact of COVID-19 and the related impact on consumer confidence and spending may lead to a material reduction in sales of our products by our retail partners. Any reduction in sales by, or loss of, our current retail partners or customer demand, or credit risks associated with our customers and retail partners, could harm our business, results of operations, and financial condition.

Conflicts with our channel and distribution partners could harm our business and operating results.

Our increasing focus on direct-to-consumer channels could cause one or more of our traditional retailer partners to de-emphasize our brand, causing a potential reduction in product sales from that partner. Retailer partners may perceive themselves to be at a disadvantage relative to content quality or online shopping convenience. Due to these and other factors, conflicts in our sales channels could arise and cause channel partners to divert resources away from the promotion and sale of our products. Any of these situations could adversely impact our business and results of operations.

We are subject to risks related to online payment methods.

We currently accept payments for purchases through our website and mobile apps using a variety of methods, including credit cards, debit cards, gift cards and Affirm, a third-party provider of financing for consumer purchases. As we offer new payment options to consumers, we may be subject to additional regulations, compliance requirements, fraud, and other risks. For certain payment methods, we pay interchange and other fees, which may increase over time and raise our operating costs and lower profitability. As a merchant that accepts debit and credit cards for payment, we are subject to the Payment Card Industry (“PCI”) Data Security Standard (“PCI DSS”), issued by the PCI Security Standards Council. PCI DSS contains a set of requirements designed to ensure that companies that process, store or transmit payment card information maintain a secure environment to protect cardholder data. Because we accept debit and credit cards for payment, we are also subject to the data encryption standards and payment network security operating guidelines of the American National Standards Institute. Additionally, the Fair and Accurate Credit Transactions Act requires systems that print payment card receipts to employ personal account number truncation so that the consumer’s full account number is not viewable on the slip. Failure to be PCI compliant or to meet other payment card standards may result in the imposition of financial penalties or the allocation by the card brands of the costs of fraudulent charges to us.

 

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Further, as our business changes, we may be subject to different rules under existing standards, which may require new assessments that involve costs above what we currently pay for compliance. In the future, as we offer new payment options to consumers, including offering integrated emerging mobile and other payment methods, we may be subject to additional regulations, compliance requirements, and fraud. If we fail to comply with the rules or requirements of any provider of a payment method we accept, if the volume of fraud in our transactions limits or terminates our rights to use payment methods we currently accept, or if a data breach occurs relating to our payment systems, we may, among other things, be subject to fines, investigations, legal proceedings, or higher transaction fees and may lose, or face restrictions placed upon, our ability to accept credit card payments from consumers or facilitate other types of online payments. If any of these events were to occur, our business, financial condition, and results of operations could be materially and adversely affected.

Social media platforms present risks and challenges that could cause damage to our brand and reputation as well as to our results of operations.

Social media platforms present risks and challenges that have resulted, and may in the future result, in damage to our brand and reputation, and could materially impact our results of operations. As social media platforms have grown in size and popularity, we have received, and may continue to receive, a high degree of coverage that is published or otherwise disseminated by third parties via such platforms, as well as via blogs, articles, message boards, forums and other media. The considerable expansion in the use of social media platforms over recent years has increased the volume of, and speed at which, negative publicity arising from certain events can be generated and spread, and we may be unable to timely respond to, correct any inaccuracies in, or adequately address negative perceptions arising from such coverage. Such negative or inaccurate posts or comments about us or our products on social media platforms could damage our reputation, brand image and goodwill, and we could lose the confidence of our customers and partners, regardless of whether such information is true and regardless of any number of measures we may take to address them.

This social media coverage includes coverage that is not attributable to statements made by our officers or associates. Information provided by third parties, including by individuals or entities that are self-described grilling “experts” or that make use of our trademarks without permission, may not be reliable or accurate and could materially impact our brand, reputation and results of operations. There is also the potential that bad actors with interests that conflict with ours could disingenuously post negatively or critically about us on social media for their own benefit, an action for which we have little recourse. Our policies and procedures regarding social media have not always been, and may not in the future be effective in preventing the inappropriate use of social media platforms, including blogs, social media websites, unofficial user groups, and other forms of internet-based communications, and the related spread of misinformation or unauthorized display of our trademarks by third parties thereon.

Our brand could be harmed if we are unable to correct misinformation, or if our public image were to be tarnished by negative publicity, including through social media or other communications from our community. Unfavorable publicity about us, including our products, technology, personnel and suppliers, could diminish confidence in, and the use of, our products. Such negative publicity also could adversely affect the size, engagement, activity and loyalty of our customer base or the effectiveness of word-of-mouth marketing, and result in decreased revenue, or require us to expend additional funds for marketing efforts, which could adversely affect our business, financial condition and results of operations.

 

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Risks Related to Government Regulation, Litigation and Intellectual Property Matters

We may be negatively impacted by litigation and other claims, including intellectual property, product liability or warranty claims, and health and safety concerns, including product recalls, could negatively impact our sales and expose us to litigation.

We have been, and in the future may be, made a party to litigation arising in the ordinary course of our business, including those relating to commercial or contractual disputes with suppliers, customers or parties to acquisitions and divestitures, intellectual property matters, product liability, the use or installation of our products, consumer matters, employment and labor matters, and environmental, health and safety matters, including claims based on alleged exposure to asbestos-containing product components. The outcome of such legal proceedings cannot be predicted with certainty and some may be disposed of unfavorably to us. Regardless of outcome, legal proceedings can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. In addition, we have agreed to provide indemnification in connection with prior acquisitions or dispositions for certain of these matters, and we cannot assure you that material indemnification claims will not be brought against us in the future.

Product quality issues could negatively impact consumer confidence in our brands and our business. If our products do not meet applicable safety standards or grill owners’ expectations regarding safety or quality, we could experience lost sales and increased costs and be exposed to legal, financial, and reputational risks, as well as governmental enforcement actions. Actual, potential or perceived product safety concerns could expose us to litigation, as well as government enforcement actions, and result in costly product recalls and other liabilities.

We have in the past and may in the future implement a voluntarily recall or market withdrawal or may be required to do so by a regulatory authority. A recall or market withdrawal of one of our products would be costly and would divert management resources. A recall or withdrawal of one of our products, or a similar product processed by another entity, also could impair sales of our products because of confusion concerning the scope of the recall or withdrawal, or because of the damage to our reputation for quality and safety.

In addition, if our products are, or are alleged to be, defectively designed, manufactured or labeled, contain, or are alleged to contain, defective components or components containing hazardous materials, such as asbestos, or are misused, we may become subject to costly litigation initiated by grill owners. For example, in the past, we have been subject to litigation arising from fires and other thermal events which occurred in connection with our products, due to consumer misuse, incorrect third-party assembly, improper maintenance and faulty propane tanks as well as other causes. This risk is inherent as our products are designed to be used in connection with highly flammable and volatile fuels. In addition to the reputational effects that fire and thermal events may cause due to the negative publicity that these events may receive on social media, product liability claims themselves could harm our reputation, divert management’s attention from our core business, be expensive to defend, and may result in sizable damage awards against us. Although we maintain product liability insurance, we may not have sufficient insurance coverage for future product liability claims. We may not be able to obtain insurance in amounts or scope sufficient to provide us with adequate coverage against all potential liabilities. Product liability claims brought against us, with or without merit, could increase our product liability insurance rates or prevent us from securing continuing coverage, harm our reputation, significantly increase our expenses, and reduce product sales. Product liability claims could cause us to incur significant legal fees, and deductibles and claims in excess of our insurance coverage would be paid out of cash reserves, harming our financial condition and operating results. In addition, successful product liability claims made against one of our competitors could cause claims to be made against us or expose us to a perception that we are vulnerable to similar claims. Claims against us, regardless of their merit or potential outcome, may also hurt our ability to obtain acceptance of our products or to expand our business.

 

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If we are unable to obtain, maintain, and enforce intellectual property protection for our products or if the scope of our intellectual property protection is not sufficiently broad, others may be able to develop and commercialize products substantially similar to ours, and our ability to successfully commercialize our products may be compromised.

Our business and our ability to compete effectively depend on our ability to obtain, maintain, protect and enforce our intellectual property rights, confidential information and know-how. We rely on a combination of patent, copyright, trademark, trade secret and other intellectual property laws in the U.S. and similar laws in other countries, as well as confidentiality procedures, cybersecurity practices and contractual provisions and restrictions, to protect the intellectual property rights and other proprietary rights relating to our products and proprietary technology. Despite our efforts to obtain, maintain, protect and enforce our intellectual property rights and other proprietary rights, there can be no assurance that these protections will be available in all cases or will be adequate to prevent our competitors or other third parties from copying, reverse engineering, accessing or otherwise obtaining and using our technology, intellectual property rights or other proprietary rights or products without our permission. Further, there can be no assurance that our competitors will not independently develop products that are substantially equivalent or superior to our products or design around our intellectual property rights and other proprietary rights. In each case, our ability to compete could be significantly impaired.

We may, over time, increase our investment in protecting our intellectual property rights through additional trademark, patent, copyright and other intellectual property filings, which could be expensive and time-consuming. We may not be able to obtain registered intellectual property protection for our products and even if we are successful in obtaining effective patent, trademark, trade secret and copyright protection, it is expensive to maintain these rights in terms of application and maintenance costs, and the time and costs required to defend our rights could be substantial. Moreover, our failure to develop and properly manage new intellectual property rights could hurt our market position and business opportunities. Furthermore, recent changes to U.S. intellectual property laws may jeopardize the enforceability and validity of our intellectual property portfolio and harm our ability to obtain patent protection of some of our unique business methods.

In addition, these measures may not be sufficient to offer us meaningful protection or provide us with any competitive advantages. We will not be able to protect our intellectual property rights if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property rights. Additionally, effective intellectual property protection may not be available in every country in which we offer our products and services, and the laws of certain non-U.S. countries where we do business or may do business in the future may not recognize intellectual property rights or protect them to the same extent as do the laws of the U.S. Moreover, any changes in, or unexpected interpretations of, intellectual property laws may compromise our ability to enforce our trade secret and intellectual property rights. If we are unable to adequately protect our intellectual property rights and other proprietary rights, our competitive position and our business could be harmed, as third parties may be able to commercialize and use products and technologies that are substantially the same as ours to compete with us without incurring the development and licensing costs that we have incurred. Any of our owned or licensed intellectual property rights could be challenged, invalidated, circumvented, infringed, misappropriated or violated, our trade secrets and other confidential information could be disclosed in an unauthorized manner to third parties, or our intellectual property rights may not be sufficient to permit us to take advantage of current market trends or to otherwise provide us with competitive advantages, which could result in costly redesign efforts, discontinuance of some of our offerings or other competitive harm.

 

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We may become involved in lawsuits to protect or enforce our intellectual property rights, which could be expensive, time-consuming and unsuccessful.

Third parties, including our competitors, could be infringing, misappropriating or otherwise violating our intellectual property rights. Monitoring unauthorized use of our intellectual property rights is difficult and costly. From time to time, we seek to analyze our competitors’ products and services, and may in the future seek to enforce our rights against potential infringement, misappropriation or violation of our intellectual property rights. However, the steps we have taken to protect our proprietary rights may not be adequate to enforce our rights as against such infringement, misappropriation or violation of our intellectual property rights. We may not be able to detect unauthorized use of, or take appropriate steps to enforce, our intellectual property rights. Any inability to meaningfully enforce our intellectual property rights could harm our ability to compete and reduce demand for our products and services.

We are, and may in the future become, involved in lawsuits to protect or enforce our intellectual property rights. An adverse result in any litigation proceeding could harm our business. In any lawsuit we bring to enforce our intellectual property rights, a court may refuse to stop the other party from using the technology or products at issue on grounds that our intellectual property rights do not cover the technology or products in question. Further, in such proceedings, the defendant could counterclaim that our intellectual property rights are invalid or unenforceable and the court may agree, in which case we could lose valuable intellectual property rights. The outcome in any such lawsuits are unpredictable. Even if resolved in our favor, such lawsuits may cause us to incur significant expenses, and could distract our technical and management personnel from their normal responsibilities. We may not have sufficient financial or other resources to conduct any such litigation or proceedings adequately, and some of our counterparties may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a substantial effect on the price of our common stock. Moreover, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. Any of the foregoing could have a material adverse effect on our competitive position, business, financial condition and results of operations.

Sales of counterfeit versions of our products, as well as unauthorized sales of our products, may adversely affect our reputation, business, financial condition, results of operations and cash flows.

Our products, including our grills and grilling accessories, have and may continue to become subject to competition from counterfeit products, which are products sold under the same or very similar brand names and/or having a similar appearance to genuine products, but which are sold without proper licenses or approvals. Because a portion of our products are manufactured overseas in countries where counterfeiting is more prevalent and our intellectual property rights may not be as adequately protected as they are in the U.S., and we intend to increase our sales internationally over the long term, we may experience increased counterfeiting of our products. Increased counterfeiting has also resulted from the proliferation of internet-based marketplaces through which third parties can, with relative ease, sell and distribute imitation products. Such counterfeit products divert sales from genuine products, often are of lower cost and quality, may pose safety risks, and have the potential to damage the reputation for quality and effectiveness of our genuine products. Illegal sales of counterfeit products could have an adverse impact on our business, financial condition, results of operations and cash flows. In addition, if illegal sales of counterfeit products result in adverse product liability or negative consumer experiences, we may be associated with negative publicity resulting from such

 

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incidents. Although we seek to monitor the existence of counterfeit products and initiate actions to remove them from sale, we may not be able to prevent third parties from manufacturing, selling or purporting to sell counterfeit products competing with our products. Such sales of counterfeit products may also be occurring without our knowledge. The existence and any increase in production or sales of counterfeit products or unauthorized sales could negatively impact our sales, brand reputation, business, financial condition, results of operations and cash flows.

Any claim of infringement, misappropriation or violation of another party’s intellectual property rights could cause us to incur significant costs and to cease the commercialization of our products and services, which could have a material and adverse effect on our business, financial condition and results of operations.

In recent years, there has been significant litigation in the U.S. involving intellectual property rights. Companies in the outdoor cooking industry are increasingly bringing and becoming subject to lawsuits alleging infringement, misappropriation or violation of intellectual property rights, particularly patent rights, and our competitors and other third parties may hold patents or have pending patent applications or other intellectual property rights, which could be related to our business. These risks have been amplified by the increase in patent holding companies and other third parties, commonly referred to as non-practicing entities, that seek to monetize patents they have purchased or otherwise obtained and whose sole or primary business is to assert such claims. Regardless of the merits of any other intellectual property litigation, we may be required to expend significant management time and financial resources on the defense of such claims, and any adverse outcome of any such claim or the above-referenced review could harm our business. We expect that we may receive in the future notices that claim we or our partners, customers, or other third parties using our products and services have infringed, misappropriated, misused or otherwise violated other parties’ intellectual property rights, particularly as the number of competitors in our market grows and the functionality of applications amongst competitors overlaps. Any future litigation, whether or not successful, could be extremely costly to defend, divert our management’s time, attention and resources, damage our reputation and brand, harm our ability to compete in the marketplace and substantially harm our business.

If any of our technologies, products or services are found to infringe, misappropriate or violate a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue commercializing or using such technologies, products or services. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be nonexclusive, thereby giving our competitors and other third parties access to the same technologies or products licensed to us, and it could require us to make substantial licensing and royalty payments. We also could be forced, including by court order, to cease the commercialization or use of the violating technology, products or services. Accordingly, we may be forced to design around such violated intellectual property rights, which may be expensive, time-consuming or infeasible. In addition, we could be found liable for significant monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent or other intellectual property right. Claims that we have misappropriated the confidential information or trade secrets of third parties could similarly harm our business. If we are required to make substantial payments or undertake any of the other actions noted above as a result of any intellectual property infringement, misappropriation or violation claims against us, such payments, costs or actions could have a material adverse effect on our competitive position, business, financial condition, and results of operations.

Additionally, in certain of our agreements with customers and other third parties, we have indemnification obligations for losses related to, among other things, claims by third parties of intellectual property infringement, misappropriation or other violation. Such customers or other third

 

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parties may in the future require us to indemnify them for such infringement, misappropriation or violation, breach of confidentiality or violation of applicable law, among other things. Although we normally seek to contractually limit our liability with respect to such obligations, some of these indemnity agreements may provide for uncapped liability and some indemnity provisions survive termination or expiration of the applicable agreement. Any legal claims from customers or other third parties could result in substantial liabilities, reputational harm, or the delay or loss of market acceptance of our products, and could have adverse effects on our relationships with such customers and other third parties.

If we cannot license rights to use technologies on reasonable terms, we may not be able to commercialize new products in the future.

In the future, we may identify additional third-party intellectual property rights we may need to license in order to engage in our business, including to develop or commercialize new products or services. However, such licenses may not be available on acceptable terms or at all. The licensing or acquisition of third-party intellectual property rights is a competitive area, and other well-established companies may pursue strategies to license or acquire third-party intellectual property rights that we may consider attractive or necessary. These established companies may have a competitive advantage over us due to their size, capital resources and greater development or commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. Even if such licenses are available, we may be required to pay the licensor substantial royalties based on sales of our products and services. Such royalties are a component of the cost of our products or services and may affect the margins on our products and services. In addition, such licenses may be nonexclusive, which could give our competitors access to the same intellectual property rights licensed to us. If we are unable to enter into the necessary licenses on acceptable terms or at all, if any necessary licenses are subsequently terminated, if our licensors fail to abide by the terms of the licenses, if our licensors fail to prevent infringement by third parties, or if the licensed intellectual property rights are found to be invalid or unenforceable, our business, financial condition, and results of operations could be materially and adversely affected. Moreover, we could encounter delays in the introduction of tests while we attempt to develop alternatives. Defense of any lawsuit or failure to obtain any of these licenses on favorable terms could prevent us from commercializing products, which could have a material adverse effect on our competitive position, business, financial condition and results of operations.

We may not be able to enforce our intellectual property rights throughout the world.

We may be required to protect our proprietary technology in an increasing number of jurisdictions, a process that is expensive and may not be successful, or which we may not pursue in every location due to costs, complexities or other reasons. Filing, prosecuting, maintaining, defending, and enforcing patents and other intellectual property rights on our products, services and technologies in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the U.S. can be less extensive than those in the U.S. Competitors may use our technologies in jurisdictions where we have not obtained patent protection or other intellectual property rights to develop their own products and services and, further, may export otherwise infringing, misappropriating or violating products and services to territories where we have patent or other intellectual property protection but enforcement is not as strong as that in the U.S. These products and services may compete with our products and services, and our intellectual property rights may not be effective or sufficient to prevent them from competing.

In addition, the laws of some foreign countries do not protect proprietary rights to the same extent as the laws of the U.S., and many companies have encountered significant challenges in establishing and enforcing their proprietary rights outside of the U.S. These challenges can be caused by the

 

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absence or inconsistency of the application of rules and methods for the establishment and enforcement of intellectual property rights outside of the U.S. In addition, the legal systems of some countries, particularly developing countries, do not favor the enforcement of intellectual property protection. This could make it difficult for us to stop the infringement, misappropriation or other violation of our intellectual property rights. Accordingly, we may choose not to seek protection in certain countries, and we will not have the benefit of protection in such countries. Proceedings to enforce our intellectual property rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business. Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate. In addition, changes in the law and legal decisions by courts in the U.S. and foreign countries may affect our ability to obtain adequate protection for our products, services and other technologies and the enforcement of intellectual property rights. Any of the foregoing could have a material adverse effect on our competitive position, business, financial condition and results of operations.

If we are unable to protect the confidentiality of our trade secrets, our business, financial condition, results of operations and competitive position would be harmed.

We rely on trade secrets and confidentiality agreements to protect our unpatented know-how, technology, and other proprietary information and to maintain our competitive position. With respect to our products, we consider trade secrets and know-how to be one of our primary sources of intellectual property rights. However, trade secrets and know-how can be difficult to protect. We seek to protect these trade secrets and other proprietary technology, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as certain of our employees, corporate collaborators, outside contractors, consultants, advisors, and other third parties, but we cannot guarantee that we have entered into such agreements with each party that may have or have had access to our trade secrets or proprietary information, including our technology and processes. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary or confidential information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive, and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the U.S. are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor or other third party, we would have no right to prevent them from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor or other third party, it could have a material adverse effect on our competitive position, business, financial condition and results of operations.

We may be subject to claims that our employees, consultants, advisors or independent contractors have wrongfully used or disclosed alleged trade secrets or other confidential information of their current or former employers or other third parties or claims asserting ownership of what we regard as our own intellectual property or proprietary rights.

Many of our employees, consultants, advisors and independent contractors are currently or were previously employed at other companies in our field, including our competitors or potential competitors. Although we try to ensure that our employees, consultants, advisors and independent contractors do not use the confidential or proprietary information, trade secrets or know-how of others in their work for us, we may be subject to claims that we or these individuals have, inadvertently or otherwise, improperly used or disclosed intellectual property rights, confidential or proprietary information, trade secrets or know-how, of any such individual’s current or former employer or other third party. Further, we may be subject to ownership disputes in the future arising, for example, from conflicting obligations of consultants or others who are involved in developing our products. We may also be subject to claims that former employees, consultants, independent contractors or other third parties have an ownership

 

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interest in our intellectual property rights. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

In addition, while it is our policy to require certain of our employees, suppliers, consultants, advisors and independent contractors who may be involved in the conception or development of intellectual property rights to execute agreements assigning such intellectual property rights to us, we cannot guarantee that we have entered into such agreements with each party that may have developed intellectual property rights for us. Individuals involved in the development of intellectual property rights for us may make adverse ownership claims to our current and future intellectual property rights. The assignment of intellectual property rights in agreements entered into by individuals involved in the development of intellectual property rights for us may not be self-executing, or the assignment agreements otherwise may be insufficient or breached, and we may not be able to obtain adequate remedies for such breaches. We may be forced to bring claims against third parties, or defend claims that they may bring against us, to determine the ownership of what we regard as our intellectual property rights. Additionally, to the extent that our employees, independent contractors or other third parties with whom we do business use intellectual property rights owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. Any of the foregoing could have a material adverse effect on our competitive position, business, financial condition and results of operations.

Some of our products and services contain open source software, which may pose particular risks to our proprietary software, products and services in a manner that could have a material and adverse effect on our business, financial condition and results of operations.

We use open source software in connection with our products and services and anticipate using open source software in the future. Some open source software licenses require users who distribute open source software as part of their own software product to publicly disclose all or part of the source code to such software product or to make available any derivative works of the open source code on unfavorable terms or at no cost, and we may be subject to such terms. The terms of certain open source licenses to which we are subject have not been interpreted by U.S. or foreign courts, and there is a risk that open source software licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to provide, or distribute the products or services related to, the open source software subject to those licenses. While we monitor our use of open source software and try to ensure that none is used in a manner that would require us to disclose our proprietary source code or that would otherwise breach the terms of an open source agreement, such use could inadvertently occur, or could be claimed to have occurred, in part because open source license terms are often ambiguous. Additionally, we could face claims from third parties claiming ownership of, or demanding release of, any open source software or derivative works that we have developed using such software, which could include proprietary source code, or otherwise seeking to enforce the terms of the applicable open source license. These claims could result in litigation and could require us to make our software source code freely available, purchase a costly license or cease offering the implicated products or services unless and until we can recode or reengineer such source code in a manner that avoids infringement. This reengineering process could require us to expend significant additional research and development resources, and we may not be able to complete the reengineering process successfully. In addition to risks related to license requirements, use of certain open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide support, warranties, indemnification or other contractual protection regarding infringement claims or the quality of the code. There is little legal precedent in this area and any actual or claimed requirement to disclose our proprietary source code or pay damages for breach of contract could harm our business and could help third parties, including our competitors,

 

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develop products and services that are similar to or better than ours. Any of the foregoing could have a material adverse effect on our competitive position, business, financial condition and results of operations.

Our proprietary software may not operate properly, which could damage our reputation, give rise to claims against us or divert application of our resources from other purposes, any of which could harm our business.

Proprietary software development is time-consuming, expensive and complex, and may involve unforeseen difficulties. We may encounter technical obstacles, and it is possible that we may discover additional problems that prevent our proprietary applications, including our Weber Apps, cloud infrastructure, websites or other systems from operating properly. If our proprietary mobile applications do not function reliably or fail to achieve member or customer expectations in terms of performance, we may lose or fail to grow member usage and customers could assert liability claims against us. This could damage our reputation and impair our ability to attract or maintain relationships with customers and other third parties.

If we fail to comply with our obligations under license or technology agreements with third parties, we may be required to pay damages and we could lose license rights that are critical to our business.

We license certain intellectual property rights, including technologies, data, content and software from third parties, that is important to our business, and in the future we may enter into additional agreements that provide us with licenses to valuable intellectual property rights or technology. If we fail to comply with any of the obligations under our license agreements, we may be required to pay damages and the licensor may have the right to terminate the license. Termination by the licensor would cause us to lose valuable rights, and could prevent us from selling our products and services, or inhibit our ability to commercialize future products and services. Our business would suffer if any current or future licenses terminate, if the licensors fail to abide by the terms of the license, if the licensors fail to enforce licensed patents against infringing third parties, if the licensed intellectual property rights are found to be invalid or unenforceable, or if we are unable to enter into necessary licenses on acceptable terms. In addition, our rights to certain technologies are licensed to us on a nonexclusive basis. The owners of these non-exclusively licensed technologies are therefore free to license them to third parties, including our competitors, on terms that may be superior to those offered to us, which could place us at a competitive disadvantage. Moreover, our licensors may own or control intellectual property rights that have not been licensed to us and, as a result, we may be subject to claims, regardless of their merit, that we are infringing, misappropriating or otherwise violating the licensor’s rights. In addition, the agreements under which we license intellectual property rights or technology from third parties are generally complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property rights or technology, or increase what we believe to be our financial or other obligations under the relevant agreement. Any of the foregoing could have a material adverse effect on our competitive position, business, financial condition, and results of operations.

Our collection, use, storage, transmission, disclosure and processing of personal information is subject to federal, state and international privacy and security regulations, and our failure to comply with those regulations or to adequately secure such information could result in significant liability or reputational harm and, in turn, substantial harm to our customer base and revenue.

In operating our business and providing products and services to customers, we collect, use, store, transmit, disclose and otherwise process sensitive employee and customer data, including

 

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personal information, in and across multiple jurisdictions, including, at times, across national borders. As a result, we are subject to a variety of laws and regulations in the U.S., Europe, the United Kingdom and around the world, as well as contractual obligations, regarding data privacy, security and protection. In many cases, these laws and regulations apply not only to third-party transactions, but also to transfers of information between or among us, our subsidiaries and other parties with which we have commercial relationships.

Personal privacy, information security and data protection are significant issues in the United States and globally. The regulatory framework governing the collection, use, storage, transmission, disclosure and processing of certain information, particularly financial and other personal information, is rapidly evolving and is likely to continue to be subject to uncertainty and varying interpretations. The occurrence of unanticipated events and development of evolving technologies often rapidly drives the adoption of legislation or regulations affecting the use, collection or other processing of data and manner in which we conduct our business. We publicly post documentation regarding our practices concerning the collection, use, storage, transmission, disclosure and processing of data. Although we endeavor to comply with our published policies and documentation, we may at times fail to do so or be alleged to have failed to do so. Any failure or perceived failure by us to comply with our privacy policies or any applicable privacy, security or data protection, information security or consumer protection-related laws, regulations, orders or industry standards in one or more jurisdictions could expose us to costly litigation, investigations, significant awards, fines or judgments, civil and/or criminal penalties or negative publicity, and could materially and adversely affect our business, financial condition and results of operations. The publication of our privacy policy and other documentation that provide promises and assurances about privacy and security can subject us to potential state and federal action if they are found to be deceptive, unfair or misrepresentative of our actual practices, which could materially and adversely affect our business, financial condition and results of operations.

We expect that there will continue to be new proposed and adopted laws, regulations and industry standards concerning privacy, data protection and information security in the U.S. and other jurisdictions in which we operate. Many states in which we operate have laws that protect the privacy and security of sensitive and personal information. Certain state laws may be more stringent or broader in scope, or offer greater individual rights, with respect to sensitive and personal information than federal, international or other state laws, and such laws may differ from each other, which may complicate compliance efforts. For example, California enacted the California Consumer Privacy Act of 2018 (“CCPA”) which went into effect in January 2020 and became enforceable by the California Attorney General in July 2020, and which, among other things, requires companies covered by the legislation to provide new disclosures to California residents and afford such residents new rights of access and deletion for personal information, as well as the right to opt-out of certain sales of personal information. The CCPA provides for civil penalties for violations, as well as a private right of action for certain data breaches that result in the loss of specified personal information of California residents. Additionally, a new California ballot initiative, the California Privacy Rights Act (“CPRA”) was passed in November 2020. Effective starting on January 1, 2023, the CPRA imposes additional obligations on companies covered by the legislation and will significantly modify the CCPA, including by expanding consumers’ rights with respect to certain sensitive personal information. The CPRA also creates a new state agency that will be vested with authority to implement and enforce the CCPA and the CPRA. The effects of the CCPA and the CPRA are potentially significant and may require us to modify our data collection or processing practices and policies and to incur substantial costs and expenses in an effort to comply and increase our potential exposure to regulatory enforcement and/or litigation.

Certain other state laws impose similar privacy obligations and all 50 states have laws including obligations to provide notification of security breaches of computer databases that contain personal information to affected individuals, state officers and others. For example, the CCPA has prompted a number of proposals for new federal and state-level privacy legislation, such as in Nevada, New

 

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Hampshire, Washington, Illinois and Nebraska, as well as in Virginia, which signed such legislation, the Virginia Consumer Data Protection Act (“VCDPA”), into law on March 2, 2021 with an effective date of January 1, 2023. The VCDPA and such other proposed legislation, if enacted, may add additional complexity, variation in requirements, restrictions and potential legal risk, require additional investment of resources in compliance programs, impact strategies and the availability of previously useful data and could result in increased compliance costs and/or changes in business practices and policies.

Internationally, many jurisdictions have established their own data security and privacy legal framework with which we or our customers may need to comply, including, but not limited to, the European Union, or EU. The EU’s data protection landscape is constantly changing and subject to differing interpretations, resulting in possible significant operational costs for internal compliance and risk to our business. For example, the EU has adopted the General Data Protection Regulation, or the GDPR, which went into effect in May of 2018, and has resulted and will continue to result in significantly greater compliance burdens and costs for companies with users and operations in the EU and European Economic Area, including robust obligations on data processors and heavier documentation requirements for data protection compliance programs by companies. In particular, under the GDPR, fines of up to 20 million euros or up to 4% of the annual global revenue of the noncompliant company, whichever is greater, could be imposed for violations of certain of the GDPR’s requirements. Such penalties are in addition to any civil litigation claims by customers and data subjects. The GDPR has also increased the scrutiny of transfers of personal data to the U.S. and other jurisdictions that the European Commission does not recognize as having “adequate” data protection laws. The efficacy and longevity of current transfer mechanisms to the U.S. remain uncertain. For example, in 2016, the EU and U.S. agreed to a transfer framework for data transferred to the U.S., called the Privacy Shield, but the Privacy Shield was invalidated in July 2020 by the Court of Justice of the European Union. Due to this evolving regulatory guidance, we may need to invest in additional technical, legal and organizational safeguards in the future to avoid disruptions to data flows within our business and to and from our customers and service providers. Furthermore, this uncertainty, and its eventual resolution, may increase our costs of compliance, impede our ability to transfer data and conduct our business, and harm our business or results of operations.

Because the interpretation and application of many privacy and data protection laws along with contractually imposed industry standards are uncertain, it is possible that these laws may be interpreted and applied in a manner that is inconsistent with our existing data management practices. Any failure or perceived failure by us, or any third parties with which we do business, to comply with our posted privacy policies, changing consumer expectations, evolving laws, rules and regulations, industry standards, or contractual obligations to which we or such third parties are or may become subject, may result in actions or other claims against us by governmental entities or private actors, the expenditure of substantial costs, time and other resources or the incurrence of significant fines, penalties or other liabilities. In addition, any such action, particularly to the extent we were found to be guilty of violations or otherwise liable for damages, would damage our reputation and adversely affect our business, financial condition and results of operations.

Following the United Kingdom’s withdrawal from the EU on January 31, 2020 and the end of the transitional period on December 31, 2020, the United Kingdom introduced the UK General Data Protection Regulation, which currently makes the privacy regimes of the EU and United Kingdom parallel in nature, though it is possible either the EU or the United Kingdom could elect to change its approach and create differences in legal requirements and regulation. The relationship between the United Kingdom and the EU in relation to certain aspects of data protection law remains unclear, for example, with respect to how data transfers between EU member states and the United Kingdom will be treated and the role of the United Kingdom’s Information Commissioner’s Office with respect to the EU following the end of the transitional period. Following the expiration of such period, there will be

 

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increasing scope for divergence in application, interpretation and enforcement of the data protection law as between the United Kingdom and the European Economic Area.

We cannot yet fully determine the long-term impact these or future laws, rules and regulations may have on our business or operations. Any such laws, rules and regulations may be inconsistent among different jurisdictions, subject to differing interpretations or may conflict with our current or future practices. Additionally, our customers may be subject to differing privacy laws, rules and legislation, which may mean that they require us to be bound by varying contractual requirements applicable to certain other jurisdictions. Adherence to such contractual requirements may impact our collection, use, processing, storage, sharing and disclosure of various types of information, including financial information and other personal information, and may cause us to become bound by, or to voluntarily comply with, self-regulatory or other industry standards relating to these matters that may further change as laws, rules and regulations evolve. Complying with these requirements and changing our policies and practices may be onerous and costly, and we may not be able to respond quickly or effectively to regulatory, legislative and other developments. These changes may in turn impair our ability to offer our existing or planned products and services and/or increase our cost of doing business. As we expand our customer base, these requirements may vary from customer to customer, further increasing the cost of compliance and doing business.

If we fail to comply with anti-corruption or economic sanction regulations, we could be subject to substantial fines or other penalties.

Some of the countries where we operate or where our products are sold may not have as strong a commitment to anti-corruption and ethical behavior that is required by U.S. laws or by our corporate policies. Any violation of the Foreign Corrupt Practices Act (“FCPA”) or any similar anti-corruption law or regulation could result in substantial fines, sanctions or civil and/or criminal penalties, debarment from business dealings with certain governments or government agencies or restrictions on the marketing of our products in certain countries, which could harm our business, financial condition or results of operations. If these anti-corruption laws or our internal policies were to be violated, our reputation and operations could also be substantially harmed. Further, detecting, investigating and resolving actual or alleged violations is expensive and can consume significant time and attention of our senior management.

Additionally, the U.S. Department of the Treasury’s Office of Foreign Assets Control and other relevant agencies of the U.S. government administer certain laws and regulations that restrict U.S. persons and, in some instances, non-U.S. persons, from conducting activities, transacting business with or making investments in certain countries, or with governments, entities and individuals subject to U.S. economic sanctions. Similar economic sanctions are imposed by the European Union and other jurisdictions. Our international operations subject us to these laws and regulations, which are complex, restrict our business dealings with certain countries, governments, entities and individuals and are constantly changing. Penalties for noncompliance with these complex laws and regulations can be significant and include substantial fines, sanctions or civil and/or criminal penalties and violations can result in adverse publicity, which could harm our business, financial condition or results of operations.

We are subject to environmental, health and safety and consumer product laws and regulations, which could subject us to liabilities, increase our costs or restrict our operations in the future.

Our properties and operations are subject to a number of environmental, health and safety laws and regulations in each of the jurisdictions in which we operate. These laws and regulations govern, among other things, air emissions, water discharges, handling and disposal of solid and hazardous substances and wastes, soil and groundwater contamination, employee health and safety and the

 

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chemical content of products. We expect to continue to incur costs to comply with these laws and regulations. If we fail to comply with these laws and regulations, we could incur substantial civil or criminal fines or penalties or enforcement actions, including regulatory or judicial orders enjoining or curtailing our operations or requiring us to conduct or fund remedial or corrective measures, install pollution control equipment or perform other actions. We may also be subject to joint and several liability for environmental investigations and cleanups, including at properties that we currently or previously owned or operated, or at sites at which waste we generated was disposed, even if the contamination was not caused by us or was legal at the time it occurred. We may face claims alleging harm to health or property or natural resource damages arising out of contamination or exposure to hazardous substances.

As a distributor of consumer products, certain of our products are subject to the U.S. Consumer Product Safety Act, which empowers the U.S. Consumer Product Safety Commission (CPSC) to exclude from the market products that are found to be unsafe or hazardous, and to similar laws in other jurisdictions. We are regularly subject to inquiries from regulators about product safety in the United States and in other countries. Under certain circumstances, the CPSC or other regulators could require us to repair, replace or refund the purchase price of one or more of our products, or potentially even discontinue entire product lines. We also may voluntarily take such action within strictures recommended by the CPSC or other regulators. The CPSC and other regulators also can impose fines or penalties on a manufacturer for noncompliance with its requirements. Furthermore, failure to timely notify the CPSC or other regulators of a potential safety hazard can result in significant fines being assessed. Any repurchases or recalls of our products or an imposition of fines or penalties could be costly to us and could damage the reputation or the value of our brands. Additionally, other laws regulating certain consumer products exist in certain states, as well as in other countries in which we sell our products.

In addition, future developments such as new and more restrictive, or changes to existing, environmental, health or safety laws and regulations, more aggressive enforcement of existing laws and regulations, or the discovery of presently unknown environmental conditions may require expenditures that could have an adverse effect on our business, financial condition, and results of operations.

Risks Related to Our Financial Condition

Our debt covenants may limit our ability to complete acquisitions, incur debt, make investments, sell assets, merge or complete other significant transactions.

Our credit facilities include limitations on a number of our activities in the event of a default, and in some cases regardless of whether a default has occurred, including our ability to:

 

   

incur additional debt;

 

   

pay dividends or repurchase stock;

 

   

create liens on our assets or make guarantees;

 

   

enter certain transactions with affiliates;

 

   

make certain investments or loans; or

 

   

dispose of or sell assets, make acquisitions above certain amounts or enter into a merger or similar transaction.

We are also required to comply with certain restrictive covenants in our credit facilities, any of which may limit our ability to engage in acts that may be in our best long-term interests. Additionally, a

 

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breach of any of the restrictive covenants in our credit facilities could result in a default under these facilities. If a default occurs while we have borrowing amounts outstanding, the lenders under our credit facilities may elect to declare all outstanding borrowings, together with accrued interest, to be immediately due and payable, to terminate any commitments they have to provide further borrowings and to exercise any other rights they have under the facilities or applicable law.

We rely on our free cash flow generation and credit facilities to provide us with sufficient working capital to operate our business and finance our growth strategies.

Historically, we have relied upon our free cash flow generation and existing credit facilities to provide us with adequate working capital to operate our business. Moreover, our growth rate depends, to a large degree, on the availability of adequate capital to fund the expansion of our products offerings and market penetration, which in turn will depend in large part on cash flow generated by our business and the availability of equity and debt capital. To the extent we become more dependent upon our credit facilities to fund our operations, if our lenders reduce or terminate our access to amounts under our credit facilities, we may not have sufficient capital to fund our working capital needs or growth strategies and/or we may need to secure additional capital or financing to fund our working capital requirements, to repay outstanding debt under our credit facilities or to finance our growth strategies. We can make no assurance that we will be successful in ensuring our availability of amounts under our credit facilities when they are needed or in connection with raising additional capital and that any amount, if raised, will be sufficient to meet our cash flow requirements. In the event we do not have available cash balances on hand for funding future operations, and if we are not able to maintain our borrowing availability under our credit facilities at that time and/or raise additional capital when needed, we may be forced to sharply curtail our efforts to manufacture and promote the sale of our products or to curtail our operations.

An increase in interest rates could have a material adverse effect on the Company’s business.

Fluctuations in interest rates can increase borrowing costs on the portion of our debt that is variable, and interest rate increases on this portion of the Company’s debt could have a material adverse effect on the Company’s business. Indeed, increases in interest rates would increase the cost of servicing our debt and could reduce our profitability and cash flows. In response to the last global economic recession, extraordinary monetary policy actions of the U.S. Federal Reserve and other central banking institutions, including the utilization of quantitative easing, were taken to create and maintain a low interest rate environment. However, the U.S. Federal Reserve raised its benchmark interest rate nine times since December 2015, including four times in 2018, each time by a quarter of a percentage point, before reducing interest rates in 2019 three times. In response to the COVID-19 pandemic, the U.S. Federal Reserve reduced its benchmark interest rate to 0% in March 2020 before voting in November 2020 to keep short-term interest rates anchored in a range between 0% and 0.25%. Any change in the fiscal policies or stated target interest rates of the U.S. Federal Reserve or other central banking institutions, or market expectations of such change, are difficult to predict and may result in significantly higher long-term interest rates. Such a transition may be abrupt and may, among other things, reduce the availability and/or increase the costs of obtaining new debt and refinancing existing indebtedness.

An increase in interest rates may also occur from changes in regulatory standards or industry practices, such as the contemplated transition away from the London Interbank Offered Rate (“LIBOR”) as a benchmark reference for short-term interest rates. Such a transition may result in the usage of a higher reference rate for our variable rate debt. The U.S. Federal Reserve has sponsored the Alternative Reference Rates Committee (“ARRC”), which serves as a forum to coordinate and track planning as market participants currently using LIBOR consider (a) transitioning to alternative reference rates where it is deemed appropriate and (b) addressing risks in legacy contracts’ language

 

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given the possibility that LIBOR might stop. On April 3, 2018, the U.S. Federal Reserve began publishing three new reference rates, including the Secured Overnight Financing Rate (“SOFR”). SOFR is observed and backward looking, which stands in contrast with LIBOR under the current methodology, which is an estimated forward-looking rate and relies, to some degree, on the expert judgment of submitting panel members. Given that SOFR is a secured rate backed by government securities, it will be a rate that does not take into account bank credit risk (as is the case with LIBOR). SOFR is therefore likely to be lower than LIBOR and is less likely to correlate with the funding costs of financial institutions. ARRC has recommended SOFR as the alternative to LIBOR and published fallback interest rate consultations for public comment and a Paced Transition Plan to SOFR use. The Financial Stability Board has taken an interest in LIBOR and possible replacement indices as a matter of risk management. The International Organization of Securities Commissions, or IOSCO, has been active in this area and is expected to call on market participants to have backup options if a reference rate, such as LIBOR, ceases publication. The International Swaps and Derivatives Association (“ISDA”) has published guidance on interest rate benchmarks and alternatives in July and August 2018. ISDA also published a protocol providing details of the fallback rate conversion methodology in October 2020. It cannot be predicted whether SOFR or another index or indices will become a market standard that replaces LIBOR, and if so, the effects on our future results of operations or financial condition. In a November 30, 2020 announcement, LIBOR’s administrator signaled to the market that USD LIBOR for the most liquid maturities is now likely to continue to be published until June 30, 2023, which would allow time for certain legacy contracts to mature before USD LIBOR is no longer available, and would also allow for more time for SOFR to develop. If LIBOR ceases to exist prior to the maturity of our contracts, we may need to renegotiate our credit agreements that utilize LIBOR as a factor in determining the interest rate to replace LIBOR with the new standard that is established.

Risks Related to Our Organizational Structure

We are a holding company and our principal asset after completion of this offering will be our        % ownership interest in Weber HoldCo LLC, and we are accordingly dependent upon distributions from Weber HoldCo LLC to pay dividends, if any, and taxes, make payments under the Tax Receivable Agreement and pay other expenses.

We are a holding company and, upon completion of the Reorganization Transactions and this offering, our principal asset will be    % of the outstanding LLC Units. See “Organizational Structure.” We have no independent means of generating income from operations. Weber HoldCo LLC is, and will continue to be, treated as a partnership for U.S. federal income tax purposes and, as such, will not be subject to U.S. federal income tax. Instead, the taxable income of Weber HoldCo LLC will be allocated to holders of LLC Units, including us. Accordingly, we will incur income taxes on our allocable share of any net taxable income of Weber HoldCo LLC. We will also incur expenses related to our operations, and will have obligations to make payments under the Tax Receivable Agreement. As the sole managing member of Weber HoldCo LLC, we intend to cause Weber HoldCo LLC to make distributions to the holders of LLC Units and us, in amounts sufficient to (i) generally cover all applicable taxes payable by us and the holders of LLC Units, (ii) allow us to make any payments required under the Tax Receivable Agreement we intend to enter into in connection with this offering, (iii) fund dividends to our stockholders in accordance with our dividend policy, to the extent that our board of directors declares such dividends and (iv) pay our expenses.

Deterioration in the financial conditions, earnings or cash flow of Weber HoldCo LLC and its subsidiaries for any reason could limit or impair their ability to pay such distributions. Additionally, to the extent that we need funds and Weber HoldCo LLC is restricted from making such distributions to us under applicable law or regulation, as a result of covenants in its debt agreements or otherwise, we may not be able to obtain such funds on terms acceptable to us, or at all, and, as a result, could suffer a material adverse effect on our liquidity and financial condition.

 

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In certain circumstances, Weber HoldCo LLC will be required to make distributions to us and the other holders of LLC Units, and the distributions that Weber HoldCo LLC will be required to make may be substantial.

Under the Amended LLC Agreement, Weber HoldCo LLC will generally be required from time to time to make pro rata distributions in cash to us and the other holders of LLC Units at certain assumed tax rates in amounts that are intended to be sufficient to cover the taxes on our and the other LLC Unit holders’ respective allocable shares of the taxable income of Weber HoldCo LLC. As a result of (i) potential differences in the amount of net taxable income allocable to us and the other LLC Unit holders, (ii) the lower tax rate applicable to corporations than individuals and (iii) the favorable tax benefits that we anticipate receiving from (a) acquisitions of interests in Weber HoldCo LLC in connection with acquisitions by Weber Inc. of LLC Units from certain of our existing equityholders in connection with this offering and future taxable redemptions or exchanges of LLC Units for shares of our Class A common stock or cash and (b) payments under the Tax Receivable Agreement, we expect that these tax distributions will be in amounts that exceed our tax liabilities and obligations to make payments under the Tax Receivable Agreement. Our board of directors will determine the appropriate uses for any excess cash so accumulated, which may include, among other uses, dividends, repurchases of our Class A common stock and the payment of other expenses. While we intend to distribute this excess cash to our shareholders as dividends pursuant to our dividend policy, we will have no obligation to distribute such cash (or other available cash other than any declared dividend) to our stockholders. No adjustments to the redemption or exchange ratio of LLC Units for shares of Class A common stock will be made as a result of either (i) any cash distribution by us or (ii) any cash that we retain and do not distribute to our stockholders. To the extent that we do not distribute such excess cash as dividends on our Class A common stock and instead, for example, hold such cash balances or lend them to Weber HoldCo LLC, holders of LLC Units would benefit from any value attributable to such cash balances as a result of their ownership of Class A common stock following a redemption or exchange of their LLC Units. See “Certain Relationships and Related Party Transactions—Amended LLC Agreement.”

We are controlled by the Pre-IPO LLC Members whose interests in our business may be different than yours, and certain statutory provisions afforded to stockholders are not applicable to us.

The Pre-IPO LLC Members will control approximately    % of the combined voting power of our common stock (or    % if the underwriters exercise their option to purchase additional shares of Class A common stock in full) after the completion of this offering and the application of the net proceeds from this offering. Further, pursuant to the Stockholders Agreement, we and the Pre-IPO LLC Members will enter into, the Pre-IPO LLC Members may approve or disapprove our change of control transactions, including mergers or amalgamations, consolidations or a sale of all or substantially all assets and any dissolution, liquidation or reorganization of us or our subsidiaries. In addition, the Stockholders Agreement will provide that approval by the Pre-IPO LLC Members is required for changes to the strategic direction or scope of our principal business or that of Weber HoldCo LLC. Furthermore, the Stockholders Agreement will provide that, until the Pre-IPO LLC members beneficially hold at least a majority of the aggregate outstanding shares of our common stock, which we refer to as the “Majority Ownership Requirement,” the Pre-IPO LLC Members may designate a majority of the nominees for election to our board of directors, including the nominee for election to serve as Chair of our board of directors; even after the Majority Ownership Requirement is no longer met, Pre-IPO LLC Members can continue to retain certain designation rights under the Stockholders Agreement proportionate to their percentage ownership in our common stock. See “Certain Relationships and Related Party Transactions—Stockholders Agreement.”

This concentration of ownership and voting power may also delay, defer or even prevent an acquisition by a third party or other change of control of our company, which could deprive you of an

 

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opportunity to receive a premium for your shares of Class A common stock and may make some transactions more difficult or impossible without the support of the Pre-IPO LLC Members, even if such events are in the best interests of minority stockholders. Furthermore, this concentration of voting power with the Pre-IPO LLC Members may have a negative impact on the price of our Class A common stock.

We cannot predict whether our dual-class structure, combined with the concentrated control of the Pre-IPO LLC Members, will result in a lower or more volatile market price of our Class A common stock or in adverse publicity or other adverse consequences. For example, certain index providers have announced restrictions on including companies with multiple-class share structures in certain of their indexes. In July 2017, FTSE Russell announced that it plans to require new constituents of its indexes to have greater than 5% of the company’s voting rights in the hands of public stockholders, and S&P Dow Jones announced that it will no longer admit companies with multiple-class share structures to certain of its indexes. Because of our dual-class structure, we will likely be excluded from these indexes and we cannot assure you that other stock indexes will not take similar actions. Given the sustained flow of investment funds into passive strategies that seek to track certain indexes, exclusion from stock indexes would likely preclude investment by many of these funds and could make our Class A common stock less attractive to other investors. As a result, the market price of our Class A common stock could be adversely affected.

The Pre-IPO LLC Members’ interests may not be fully aligned with yours, which could lead to actions that are not in your best interests. Because the Pre-IPO LLC Members hold a majority of their economic interests in our business through Weber HoldCo LLC rather than through Weber Inc., they may have conflicting interests with holders of shares of our Class A common stock. For example, the Pre-IPO LLC Members may have a different tax position from us, which could influence their decisions regarding whether and when we should dispose of assets or incur new or refinance existing indebtedness, especially in light of the existence of the Tax Receivable Agreement that we will enter into in connection with this offering, and whether and when we should undergo certain changes of control for purposes of the Tax Receivable Agreement or terminate the Tax Receivable Agreement. In addition, the structuring of future transactions may take into consideration these tax or other considerations even where no similar benefit would accrue to us. Pursuant to the Bipartisan Budget Act of 2015, for tax years beginning after December 31, 2017, if the IRS makes audit adjustments to Weber HoldCo LLC’s federal income tax returns, it may assess and collect any taxes (including any applicable penalties and interest) resulting from such audit adjustment directly from Weber HoldCo LLC. If, as a result of any such audit adjustment, Weber HoldCo LLC is required to make payments of taxes, penalties and interest, Weber HoldCo LLC’s cash available for distributions to us may be substantially reduced. These rules are not applicable to Weber HoldCo LLC for tax years beginning on or prior to December 31, 2017. See “Certain Relationships and Related Party Transactions—Tax Receivable Agreement.” In addition, the Pre-IPO LLC Members’ significant ownership in us and resulting ability to effectively control us may discourage someone from making a significant equity investment in us, or could discourage transactions involving a change in control, including transactions in which you as a holder of shares of our Class A common stock might otherwise receive a premium for your shares over the then-current market price.

We have opted out of Section 203 of the General Corporation Law of the State of Delaware, or DGCL, which prohibits a publicly held Delaware corporation from engaging in a business combination transaction with an interested stockholder for a period of three years after the interested stockholder became such unless the transaction fits within an applicable exemption, such as board approval of the business combination or the transaction which resulted in such stockholder becoming an interested stockholder. Therefore, after the 180-day lock-up period expires, the Pre-IPO LLC Members will be able to transfer control of us to a third party by transferring their shares of our common stock (subject

 

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to certain restrictions and limitations), which would not require the approval of our board of directors or our other stockholders.

The doctrine of “corporate opportunity” will not apply with respect to the Pre-IPO LLC Members and our directors who are not employed by us or our subsidiaries, and their respective affiliates.

Pursuant to our certificate of incorporation, to the fullest extent permitted by law, we will waive, on behalf of ourselves and our subsidiaries, the doctrine of “corporate opportunity” under Delaware law will only apply against the Pre-IPO LLC Members and directors who are not employed by us or our subsidiaries, and their respective affiliates. See “Description of Capital Stock—Corporate Opportunity.” The doctrine of corporate opportunity generally requires, among other things, a corporation’s fiduciary to refrain from engaging in corporate opportunities that are in lines of business reasonably similar to the present or prospective business of such corporation, unless that opportunity is first presented to the corporation and the corporation chooses not to pursue that opportunity. As a result of our waiver, certain of our stockholders, directors and their respective affiliates will not be prohibited from operating or investing in competing businesses. We, therefore, may find ourselves in competition with certain of our stockholders, 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 a corporate opportunity or suffer competitive harm, which could negatively impact our business, financial condition, results of operations and cash flow.

We will be a “controlled company” within the meaning of the NYSE rules and, as a result, qualify for, and will rely on, exemptions from certain corporate governance requirements that provide protection to the stockholders of companies that are subject to such corporate governance requirements.

Upon completion of this offering, BDT Capital Partners LLC will continue to beneficially own more than 50% of the voting power for the election of members of our board of directors. As a result, we will be a “controlled company” within the meaning of the corporate governance standards of the NYSE rules. Under these rules, a listed company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain NYSE corporate governance requirements.

As a controlled company, we will rely on certain exemptions from the NYSE standards that may enable us not to comply with certain NYSE corporate governance requirements. Accordingly, we will not have a nominating and corporate governance committee and our compensation committee will not be fully independent. As a consequence of our reliance on certain exemptions from the NYSE standards provided to “controlled companies,” you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE. See “Management—Controlled Company Exception.”

We will be required to pay the Pre-IPO LLC Members and any other persons that become parties to the Tax Receivable Agreement for certain tax benefits we may receive, and the amounts we may pay could be significant.

As described under “Organizational Structure,” acquisitions by Weber Inc. of LLC Units from certain of our existing equityholders in connection with this offering and future taxable redemptions or exchanges by the Pre-IPO LLC Members of LLC Units for shares of our Class A common stock or cash, as well as other transactions described herein, are expected to result in tax basis adjustments to the assets of Weber HoldCo LLC. These tax basis adjustments generated over time may increase (for tax purposes) the depreciation and amortization deductions available to Weber Inc. and, therefore,

 

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may reduce the amount of U.S. federal, state and local tax that Weber Inc. would otherwise be required to pay in the future. These tax attributes would not be available to us in the absence of those transactions. The anticipated tax basis adjustments are expected to reduce the amount of tax that we would otherwise be required to pay in the future.

We intend to enter into the Tax Receivable Agreement with the Pre-IPO LLC Members that will provide for the payment by us to the Pre-IPO LLC Members of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize as a result of (i) Weber Inc.’s allocable share of certain existing tax basis in tangible and intangible assets related to certain transactions that resulted in a step-up in Weber HoldCo LLC’s tax basis, (ii) any increase in tax basis in Weber Inc.’s assets resulting from (a) acquisitions by Weber Inc. of LLC Units from the Pre-IPO LLC Members in connection with this offering, (b) the purchase of LLC Units from any of the Pre-IPO LLC Members using the net proceeds from any future offering, (c) redemptions or exchanges by the Pre-IPO LLC Members of LLC Units for shares of our Class A common stock or cash or (d) payments under the Tax Receivable Agreement and (iii) tax benefits related to imputed interest resulting from payments made under the Tax Receivable Agreement. The payment obligations under the Tax Receivable Agreement are our obligations and not obligations of Weber HoldCo LLC.

We expect that, as a result of the increases in the tax basis of the tangible and intangible assets of Weber HoldCo LLC attributable to the redeemed or exchanged LLC Units, the payments that we may make to the existing Pre-IPO LLC Members could be substantial. For example, if we acquired all of the LLC Units of the Pre-IPO LLC Members in taxable transactions as of this offering, based on an initial public offering price of $                per share (the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus) and on certain assumptions, including that (i) there are no material changes in relevant tax law and (ii) we earn sufficient taxable income in each year to realize on a current basis all tax benefits that are subject to the Tax Receivable Agreement, we expect that the resulting reduction in tax payments for us, as determined for purposes of the Tax Receivable Agreement, would aggregate to approximately $                million, substantially all of which would be realized over the next 15 years, and we would be required to pay the Pre-IPO LLC Members 85% of such amount, or $                million, over the same period. The actual increases in tax basis with respect to future taxable redemptions, exchanges or purchases of LLC Units, as well as the amount and timing of any payments we are required to make under the Tax Receivable Agreement in respect of the acquisition of LLC Units from Pre-IPO LLC Members in connection with this offering or future taxable redemptions, exchanges or purchases of LLC Units, may differ materially from the amounts set forth above because the potential future reductions in our tax payments, as determined for purposes of the Tax Receivable Agreement, and the payments we will be required to make under the Tax Receivable Agreement, will each depend on a number of factors, including the market value of our Class A common stock at the time of redemption or exchange, the prevailing federal tax rates applicable to us over the life of the Tax Receivable Agreement (as well as the assumed combined state and local tax rate), the amount and timing of the taxable income that we generate in the future and the extent to which future redemptions, exchanges or purchases of LLC Units are taxable transactions.

Payments under the Tax Receivable Agreement are not conditioned on the Pre-IPO LLC Members’ continued ownership of us. There may be a material negative effect on our liquidity if, as described below, the payments under the Tax Receivable Agreement exceed the actual benefits we receive in respect of the tax attributes subject to the Tax Receivable Agreement and/or distributions to us by Weber HoldCo LLC are not sufficient to permit us to make payments under the Tax Receivable Agreement.

In addition, the Pre-IPO LLC Members will not reimburse us for any payments previously made if such tax basis increases or other tax benefits are subsequently disallowed by the Internal Revenue Service (“IRS”), except that any excess payments made to the Pre-IPO LLC Members will be netted against future payments otherwise to be made under the Tax Receivable Agreement, if any, after our determination of such excess. As a result, in such circumstances, we could make payments to the

 

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Pre-IPO LLC Members under the Tax Receivable Agreement that are greater than our actual cash tax savings and we may not be able to recoup those payments, which could negatively impact our liquidity.

In addition, the Tax Receivable Agreement provides that, upon certain mergers, asset sales or other forms of business combination, or certain other changes of control, our or our successor’s obligations with respect to tax benefits would be based on certain assumptions, including that we or our successor would have sufficient taxable income to fully utilize the increased tax deductions and tax basis and other benefits covered by the Tax Receivable Agreement. As a result, upon a change of control, we could be required to make payments under the Tax Receivable Agreement that are greater than the specified percentage of our actual cash tax savings, which could negatively impact our liquidity.

This provision of the Tax Receivable Agreement may result in situations where the Pre-IPO LLC Members have interests that differ from or are in addition to those of our other stockholders. In addition, we could be required to make payments under the Tax Receivable Agreement that are substantial and in excess of our, or a potential acquirer’s, actual cash savings in income tax.

Our obligations under the Tax Receivable Agreement will also apply with respect to any person who is issued LLC Units in the future and who becomes a party to the Tax Receivable Agreement.

Finally, because we are a holding company with no operations of our own, our ability to make payments under the Tax Receivable Agreement depends on the ability of Weber HoldCo LLC to make distributions to us. To the extent that we are unable to make payments under the Tax Receivable Agreement for any reason, such payments will be deferred and will accrue interest until paid, which could negatively impact our results of operations and could also affect our liquidity in periods in which such payments are made.

Risks Related to This Offering and Ownership of Our Class A Common Stock

There is no existing market for our Class A common stock, and we do not know if one will develop, which may cause our Class A common stock to trade at a discount from its initial public offering price and make it difficult for you to sell the shares you purchase.

Prior to this offering, there has not been a public market for our Class A common stock, and we cannot predict the extent to which investor interest in us will lead to the development of an active trading market on the NYSE, or otherwise, or how liquid that market might become. If an active trading market does not develop, you may have difficulty selling your shares of Class A common stock at an attractive price, or at all. The initial public offering price for our Class A common stock will be determined by negotiations between us and the underwriters and may not be indicative of prices that will prevail in the open market following this offering. Consequently, you may not be able to sell shares of our Class A common stock at prices equal to or greater than the price you paid in this offering.

Some provisions of Delaware law and our certificate of incorporation and bylaws may deter third parties from acquiring us and diminish the value of our Class A common stock.

Our certificate of incorporation and bylaws provide for, among other things:

 

   

division of our board of directors into three classes of directors, with each class as equal in number as possible, serving staggered three-year terms;

 

   

until the Majority Ownership Requirement is no longer met, the Pre-IPO LLC Members may designate a majority of the nominees for election to our board of directors, including the nominee for election to serve as Chair of our board of directors;

 

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at any time after the Majority Ownership Requirement is no longer met, there will be:

 

 

restrictions on the ability of our stockholders to call a special meeting and the business that can be conducted at such meeting or to act by written consent;

 

 

supermajority approval requirements for amending or repealing certain provisions in the certificate of incorporation and bylaws;

 

 

removal of directors only for cause and by the affirmative vote of holders of 75% of the total voting power of our outstanding shares of common stock, voting together as a single class; and

 

 

a prohibition on business combinations with interested shareholders under Section 203 of the DGCL;

 

   

our ability to issue additional shares of Class A common stock and to issue preferred stock with terms that our board of directors may determine, in each case without stockholder approval (other than as specified in our certificate of incorporation);

 

   

the absence of cumulative voting in the election of directors; and

 

   

advance notice requirements for stockholder proposals and nominations.

These provisions in our certificate of incorporation and bylaws may discourage, delay or prevent a transaction involving a change in control of our company that is in the best interest of our minority stockholders. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our Class A common stock if they are viewed as discouraging future takeover attempts. These provisions could also make it more difficult for stockholders to nominate directors for election to our board of directors and take other corporate actions.

If a substantial number of shares become available for sale and are sold in a short period of time, the market price of our Class A common stock could decline.

Upon the consummation of this offering, we will have                shares of Class A common stock outstanding (or                shares if the underwriters exercise their option to purchase additional shares of Class A common stock in full), excluding                 shares of Class A common stock issuable upon potential redemptions or exchanges. These shares will be freely tradable without further restriction or registration under the Securities Act of 1933, or the Securities Act. Upon completion of this offering, the                 shares of Class A common stock issuable upon potential redemption or exchange will be deemed “restricted securities” as that term is defined under Rule 144 of the Securities Act. Following the consummation of this offering, the holders of these remaining shares of our Class A common stock will be entitled to dispose of their shares following the expiration of an initial 180-day underwriter “lock-up” period (except for the                 shares subject to additional contractual restrictions) pursuant to (i) the applicable holding period, volume and other restrictions of Rule 144 or (ii) another exemption from registration under the Securities Act. See “Shares Eligible for Future Sale.” If these additional shares are sold, or if it is perceived that they will be sold, in the public market, the trading price of our common stock could decline substantially.

We expect that our stock price will be volatile, which could cause the value of your investment to decline, and you may not be able to resell your shares at or above the initial public offering price.

Securities markets worldwide have experienced, and are likely to continue to experience, significant price and volume fluctuations. This market volatility, as well as general economic, market or

 

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political conditions, could reduce the market price of our Class A common stock regardless of our results of operations. The trading price of our Class A common stock is likely to be volatile and subject to wide price fluctuations in response to various factors, including:

 

   

market conditions in the broader stock market in general, or in our industry in particular;

 

   

actual or anticipated fluctuations in our quarterly financial and results of operations;

 

   

introduction of new products and services by us or our competitors;

 

   

issuance of new or changed securities analysts’ reports or recommendations;

 

   

investor perceptions of us and the industries in which we or our clients operate;

 

   

sales, or anticipated sales, of large blocks of our Class A common stock, including those by our existing investors;

 

   

additions or departures of key personnel;

 

   

regulatory or political developments;

 

   

litigation and governmental investigations; and

 

   

changing economic and political conditions.

These and other factors may cause the market price and demand for shares of our Class A common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of Class A common stock and may otherwise negatively affect the liquidity of our Class A common stock. In addition, in the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management from our business, which could significantly harm our profitability and reputation.

Our ability to pay dividends to our stockholders may be limited by our holding company structure, contractual restrictions and regulatory requirements.

After this offering, we will be a holding company and will have no material assets other than our ownership of LLC Units in Weber HoldCo LLC, and we will not have any independent means of generating income from operations. We intend to cause Weber HoldCo LLC to make pro rata distributions to the Pre-IPO LLC Members and us in an amount at least sufficient to allow us and the Pre-IPO LLC Members to generally pay all applicable taxes, to make payments under the Tax Receivable Agreement we will enter into with the Pre-IPO LLC Members and to pay our corporate and other overhead expenses. Weber HoldCo LLC is a distinct legal entity and may be subject to legal or contractual restrictions that, under certain circumstances, may limit our ability to obtain cash from them. If Weber HoldCo LLC is unable to make distributions, we may not receive adequate distributions, which could materially and adversely affect our dividends and financial position and our ability to fund any dividends.

Our board of directors will periodically review the cash generated from our business and the capital expenditures required to finance our global growth plans and determine whether to declare periodic dividends to our stockholders. Our board of directors will take into account general economic and business conditions, including our financial condition and results of operations, capital requirements, contractual restrictions, including restrictions and covenants contained in our credit agreement, business prospects and other factors that our board of directors considers relevant. In addition, the credit agreement limits the amount of distributions that Weber HoldCo LLC can make to us and the purposes for which distributions could be made. Accordingly, we may not be able to pay

 

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dividends even if our board of directors would otherwise deem it appropriate. See “Dividend Policy,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” and “Description of Capital Stock.”

New investors in our Class A common stock will experience immediate and substantial book value dilution after this offering.

The initial public offering price of our Class A common stock will be substantially higher than the pro forma net tangible book value per share of the outstanding Class A common stock immediately after the offering. Based on our pro forma net tangible book value as of March 31, 2021, if you purchase our Class A common stock in this offering at the initial public offering price set forth on the cover page of this prospectus, you will suffer immediate dilution in net tangible book value per share of approximately $                per share. See “Dilution.”

If securities analysts do not publish research or reports about our business or if they publish negative evaluations of our Class A common stock, the price of our Class A common stock could decline.

The trading market for our Class A common stock will rely in part on 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 industry or securities analysts. If no or few analysts commence coverage of us, the trading price of our Class A common stock would likely decrease. Even if we do obtain analyst coverage, if one or more of the analysts covering our business downgrade their evaluations of our Class A common stock, the price of our Class A common stock could decline. If one or more of these analysts cease to cover our Class A common stock, we could lose visibility in the trading market for our Class A common stock, which in turn could cause our Class A common stock price to decline.

We will incur increased costs and become subject to additional regulations and requirements as a result of becoming a public company, and our management will be required to devote substantial time to new compliance matters, which could lower profits or make it more difficult to run our business.

As a public company, we expect to incur significant legal, accounting, reporting and other expenses that we have not incurred as a private company, including costs associated with public company reporting requirements and costs of recruiting and retaining non-executive directors. We also have incurred and will incur costs associated with compliance with the Sarbanes-Oxley Act and rules and regulations of the SEC, and various other costs of a public company. The expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time consuming and costly, although we are currently unable to estimate these costs with any degree of certainty. Our management will need to devote a substantial amount of time to ensure that we comply with all of these requirements. Furthermore, because we have not operated as a company with publicly traded common stock in the past, we might not be successful in implementing these requirements.

In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs

 

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necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us, which could have an adverse effect on our business, financial condition and results of operations.

These laws and regulations also could make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and regulations could also make it more difficult to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our Class A common stock, fines, sanctions and other regulatory action and potentially civil litigation.

Failure to comply with the requirements to design, implement and maintain effective internal controls could have a material adverse effect on our business and stock price.

As a public company, we will have significant requirements for enhanced financial reporting and internal controls. The process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company.

If we are unable to establish or maintain appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations on a timely basis, result in material misstatements in our consolidated financial statements and harm our operating results. In addition, we will be required pursuant to Section 404 of the Sarbanes-Oxley Act, or Section 404, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting for the first fiscal year beginning after the effective date of this offering. This assessment will need to include disclosure of any material weaknesses identified by our management in an internal control over financial reporting. In addition, our independent registered public accounting firm will be required to formally attest to the effectiveness of our internal control over financial reporting pursuant to Section 404(b) commencing the year following our first annual report required to be filed with the SEC. Testing and maintaining internal controls may divert our management’s attention from other matters that are important to our business. We may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 or our independent registered public accounting firm may not issue an unqualified opinion. If either we are unable to conclude that we have effective internal control over financial reporting or our independent registered public accounting firm is unable to provide us with an unqualified report, investors could lose confidence in our reported financial information, which could cause the price of our common stock to decline, and we may be subject to investigation or sanctions by the SEC.

The provision of our amended and restated certificate of incorporation requiring exclusive forum in certain courts in the State of Delaware or the federal district courts of the United States for certain types of lawsuits may have the effect of discouraging lawsuits against our directors and officers.

Our amended and restated certificate of incorporation will provide that, unless we, in writing, select or consent to the selection of an alternative forum, all complaints asserting any internal

 

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corporate claims (defined as claims, including claims in the right of our company: (i) that are based upon a violation of a duty by a current or former director, officer, employee, or stockholder in such capacity; or (ii) as to which the DGCL confers jurisdiction upon the Court of Chancery), to the fullest extent permitted by law, and subject to applicable jurisdictional requirements, shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have, or declines to accept, subject matter jurisdiction, another state court or a federal court located within the State of Delaware). Additionally, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. Our choice-of-forum provision will not apply to suits brought to enforce any liability or duty created by the Exchange Act. Any person or entity purchasing or otherwise acquiring or holding any interest in our common stock shall be deemed to have notice of and to have consented to the forum selection provisions described in our amended and restated certificate of incorporation. Although we believe these exclusive forum provisions benefit us by providing increased consistency in the application of Delaware law and federal securities laws in the types of lawsuits to which each applies, the exclusive 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 any of our directors, officers, or stockholders, which may discourage lawsuits with respect to such claims. Our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder as a result of our exclusive forum provisions. Further, in the event a court finds either exclusive forum provision contained in our certificate of incorporation to be unenforceable or inapplicable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.

General Risk Factors

Our future success depends on the continuing efforts of our management team and key employees, and on our ability to attract and retain highly skilled personnel and senior management.

We depend on the talents and continued efforts of our senior management and key employees. The loss of members of our management or key employees may disrupt our business and harm our results of operations. Furthermore, our ability to manage further expansion will require us to continue to attract, motivate, and retain additional qualified personnel. Competition for this type of personnel is intense, and we may not be successful in attracting, integrating, and retaining the personnel required to grow and operate our business effectively. There can be no assurance that our current management team or any new members of our management team will be able to successfully execute our business and operating strategies.

We are subject to many hazards and operational risks that can disrupt our business, some of which may not be insured or fully covered by insurance.

Our operations are subject to many hazards and operational risks inherent to our business, including: (a) general business risks; (b) product liability; (c) product recall; and (d) damage to third parties (e.g., our vendors), our infrastructure, or properties caused by fires, floods and other natural disasters, power losses, telecommunications failures, terrorist attacks, riots, cyberattacks, public health crises such as the current COVID-19 pandemic (and other future pandemics or epidemics), human errors, and similar events.

Our insurance coverage may be inadequate to cover our liabilities related to such hazards or operational risks. For example, we do not currently maintain cybersecurity insurance and our insurance providers may take the position that our coverage, under present circumstances, does not extend to business interruptions as they relate to the COVID-19 pandemic. In addition, we may not be able to

 

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maintain adequate insurance in the future at rates we consider reasonable and commercially justifiable, and insurance may not continue to be available on terms as favorable as our current arrangements. The occurrence of a significant uninsured claim or a claim in excess of the insurance coverage limits maintained by us could harm our business, results of operations, and financial condition.

We face risks associated with our increased presence in emerging markets.

Our growth plans include efforts to increase revenue from emerging markets, including through acquisitions. Local business practices in these countries may not comply with U.S. laws, local laws or other laws applicable to us or our compliance policies, and noncompliant practices may result in increased liability risks. For example, we may incur unanticipated costs, expenses or other liabilities as a result of an acquisition target’s violation of applicable laws, such as the U.S. Foreign Corrupt Practices Act (FCPA) or similar worldwide anti-bribery laws in non-U.S. jurisdictions. We may incur unanticipated costs or expenses, including post-closing asset impairment charges, expenses associated with eliminating duplicate facilities, litigation, and other liabilities. In addition, our recent and future acquisitions may increase our exposure to other risks associated with operating internationally, including foreign currency exchange rate fluctuations; political, legal and economic instability; inflation; changes in tax rates and tax laws; and work stoppages and labor relations.

Our real estate leases generally obligate us for long periods, which subjects us to various financial risks.

We lease certain of our manufacturing centers, distribution centers, and retail locations, generally for long terms. While we have the right to terminate some of our leases under specified conditions by making specified payments, we may not be able to terminate a particular lease if or when we would like to do so. If we decide to close these facilities, we are generally required to continue paying rent and operating expenses for the balance of the lease term, or to pay to exercise rights to terminate, and the performance of any of these obligations may be expensive. When we assign or sublease vacated locations, we may remain liable for the lease obligations if the assignee or sublessee does not perform. In addition, when leases for these facilities expire, we may be unable to negotiate renewals, either on commercially acceptable terms, or at all, which could cause us to close these facilities. Accordingly, we are subject to the risks associated with leasing real estate, which could have a material adverse effect on our operating results.

Further, the success of our and our partners’ retail locations depends on a number of factors including the sustained success of the shopping center in which the retail location is situated, consumer demographics, and consumer shopping habits and patterns. Changes in consumer shopping habits and patterns, reduced consumer traffic in the shopping centers where our and our partners’ retail locations are located, financial difficulties of our and our partners’ landlords, anchor tenants, or a significant number of other retailers, and shopping center vacancies or closures could impact the profitability of our and our partners’ retail locations and increase the likelihood that our and our partners’ landlords fail to fulfill their obligations and conditions under our and our partners’ lease agreements. While we and our partners’ have certain remedies and protections under our lease agreements, the loss of business that could result if a shopping center should close or if consumer traffic were to significantly decline as a result of lost tenants or improper care of the facilities or due to macroeconomic effects, including the impact of COVID-19, could have a material adverse effect on our financial position, results of operations, and cash flows.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

We have made statements under the captions “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and in other sections of this prospectus that are forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include projections of our future financial performance, our anticipated growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements, including those factors discussed under the caption entitled “Risk Factors.” You should specifically consider the numerous risks outlined under “Risk Factors.”

Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. We are under no duty to update any of these forward-looking statements after the date of this prospectus to conform our prior statements to actual results or revised expectations.

 

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ORGANIZATIONAL STRUCTURE

Structure Prior to the Reorganization Transactions

We and our predecessors have been operating for almost 70 years. We currently conduct our business through Weber-Stephen Products LLC.

Weber Inc. was incorporated as a Delaware corporation on April 1, 2021, to serve as the issuer of the Class A common stock offered hereby. Weber Merger Sub, LLC, a Delaware limited liability company, was formed in April 2021, as a wholly owned subsidiary of Weber Inc.

Weber-Stephen Products LLC recently formed Weber HoldCo LLC, a Delaware limited liability company, as a wholly owned subsidiary. WSP Intermediate, a Delaware limited liability company, was formed as a wholly owned subsidiary of Weber HoldCo LLC, and WSP Merger Sub, a Delaware limited liability company, was formed as a wholly owned subsidiary of WSP Intermediate.

All of Weber-Stephen Products LLC’s outstanding equity interests are currently owned by the following persons and entities, to whom we refer collectively as the “Pre-IPO LLC Members:”

 

   

BDT WSP Holdings, LLC, an entity controlled by BDT Capital Partners, LLC, our sponsor;

 

   

WSP Investment LLC, an entity held by the Stephen family;

 

   

Weber-Stephen Management Pool LLC, an entity held by current and former members of our management team and directors; and

 

   

certain other historical equityholders.

The Reorganization Transactions

In connection with this offering, we intend to enter into the following series of transactions to implement an internal reorganization, which we collectively refer to as the “Reorganization Transactions:”

 

   

Weber Merger Sub, LLC, a subsidiary of Weber Inc. formed in April 2021, will merge with and into Blocker, an entity controlled by BDT Capital Partners, LLC, our sponsor, with Blocker surviving the merger. As a result, (i) the of Blocker equityholders will receive Class A common stock of Weber Inc. in exchange for their equity interests in Blocker, (ii) the nominal shares of Weber Inc. held by Weber-Stephen Products LLC will be canceled for no consideration (because Weber Inc. was originally formed as a subsidiary of Weber-Stephen Products LLC) and (iii) Weber Inc. will become wholly owned by the former Blocker equityholders;

 

   

Blocker will then merge with and into Weber Inc., with Weber Inc. surviving the merger. Weber Inc.’s certificate of incorporation will be amended to authorize the issuance of two classes of common stock: Class A common stock and Class B common stock, which we refer to collectively as our “common stock.” Each share of Class A common stock and Class B common stock will entitle its holder to one vote per share on all matters submitted to a vote of our stockholders. See “Description of Capital Stock;”

 

   

WSP Merger Sub, a subsidiary of WSP Intermediate formed in April 2021, will merge with and into Weber-Stephen Products LLC, with Weber-Stephen Products LLC surviving the merger. As a result, (i) the Pre-IPO LLC Members will receive non-voting common interest units (the “LLC Units”) in Weber HoldCo LLC in exchange for all of their equity interests in Weber-Stephen Products LLC, (ii) Weber-Stephen Management Pool LLC will receive LLC Units in exchange for all of its equity interests that it holds in Weber-Stephen Products LLC and profits interests (the “Profits Interests”) in Weber HoldCo LLC with terms substantially similar to the terms of the profits interests that it holds in Weber-Stephen Products LLC and (iii) Weber-Stephen Products LLC will become a wholly owned subsidiary of Weber HoldCo LLC;

 

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the LLC Agreement of Weber HoldCo LLC will be amended and restated prior to this offering to, among other things, appoint Weber Inc. as the sole managing member of Weber HoldCo LLC;

 

   

members of the management team who indirectly hold Profits Interests through their direct interests in Weber-Stephen Management Pool LLC will be able to direct Weber-Stephen Management Pool LLC to convert those Profits Interests into a number of LLC Units based on a formula that calculates the positive difference between the then implied value of an LLC Unit and the then applicable threshold price associated with the Profits Interest;

 

   

as sole managing member of Weber HoldCo LLC, Weber Inc. will have sole authority to determine the amount and timing of distributions from Weber HoldCo LLC and offer LLC Units to future Partners, subject to any limitations set forth under the Secured Credit Facility. Because we will manage and operate the business and control the strategic decisions and day-to-day operations of Weber HoldCo LLC and will also have a substantial financial interest in Weber HoldCo LLC, we will consolidate the financial results of Weber HoldCo LLC, and a portion of our net income will be allocated to noncontrolling interest to reflect the entitlement of the Pre-IPO LLC Members to a portion of Weber HoldCo LLC’s net income. In addition, because Weber HoldCo LLC will be under the common control of BDT Capital Partners, LLC before and after the Reorganization Transactions, we will account for the Reorganization Transactions as a reorganization of entities under common control and will initially measure the interests of the Pre-IPO LLC Members in the assets and liabilities of Weber HoldCo LLC at their carrying amounts as of the date of the completion of these Reorganization Transactions;

 

   

each of the Pre-IPO LLC Members will be issued shares of our Class B common stock in an amount equal to the number of LLC Units held by each such Pre-IPO LLC Member;

 

   

under the Amended LLC Agreement, all current and future holders of LLC Units (including LLC Units issued upon conversion of Profits Interests), including the Pre-IPO LLC Members, will have the right, from and after the completion of this offering, to require Weber HoldCo LLC to redeem all or a portion of their LLC Units for, at our election, newly issued shares of Class A common stock on a one-for-one basis or a cash payment equal to the volume weighted average market price of one share of our Class A common stock for each LLC Unit redeemed (subject to customary adjustments, including for stock splits, stock dividends and reclassifications) in accordance with the terms of the Amended LLC Agreement (the “Redemption Right”). Additionally, in the event of a redemption request by a holder of LLC Units, we may, at our option, effect a direct exchange of cash or Class A common stock for LLC Units in lieu of such a redemption. A corresponding number of shares of Class B common stock will be cancelled on a one-for-one basis if we, following a redemption request of a holder of LLC Units, redeem or exchange LLC Units of such holder of LLC Units pursuant to the terms of the Amended LLC Agreement. See “Certain Relationships and Related Party Transactions—Amended LLC Agreement.” Except for transfers to us pursuant to the Amended LLC Agreement or to certain permitted transferees, the holders of LLC Units are not permitted to sell, transfer or otherwise dispose of any LLC Units or shares of Class B common stock;

 

   

members of the management team who indirectly hold LLC Units (including LLC Units issued upon conversion of Profits Interests) through their direct interests in Weber-Stephen Management Pool LLC will be able to exercise the Redemption Right with respect to those LLC Units (to the extent vested) by directing Weber-Stephen Management Pool LLC to distribute those LLC Units to them (in redemption of a corresponding number of their interests in Weber-Stephen Management Pool LLC), which will then be redeemed pursuant to the Redemption Right;

 

   

Weber Inc. will enter into a Tax Receivable Agreement that will obligate us to make payments to the Pre-IPO LLC Members and any future party to the Tax Receivable Agreement generally

 

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equal to 85% of the applicable cash savings that we actually realize as a result of Weber Inc.’s allocable share of certain existing tax basis in tangible and intangible assets related to certain transactions that resulted in a step-up in Weber HoldCo LLC’s tax basis, certain tax basis adjustments resulting from the purchase of LLC Units from the Pre-IPO LLC Members in connection with or after this offering, future taxable redemptions or exchanges of LLC Units by the holders of LLC Units and from payments made under the Tax Receivable Agreement. We will retain the benefit of the remaining 15% of these tax savings;

 

   

Weber Inc. and the Pre-IPO LLC Members will enter into the Stockholders Agreement, which will, among other things, provide that, for so long as the Substantial Ownership Requirement is met, approval by the Pre-IPO LLC Members will be required for certain corporate actions (see “Certain Relationships and Related Party Transactions—Stockholders Agreement”);

 

   

Weber Inc. will issue                  shares of Class A common stock to the public pursuant to this offering;

 

   

Weber Inc. will use all of its net proceeds from this offering (i) to acquire                 newly issued LLC Units from Weber HoldCo LLC, (ii) to acquire                  LLC Units from certain Pre-IPO LLC Members, and (iii) to repurchase                  shares of the Class A common stock received by the Blocker equityholders in connection with the merger of Weber Merger Sub, LLC with and into Blocker described in the first step of these Reorganization Transactions, in each case at a price per LLC Unit and share of Class A common stock equal to the initial public offering price of our Class A common stock minus underwriting discounts; and

 

   

Weber Inc. will cause Weber HoldCo LLC to use the proceeds from the sale of the LLC Units to Weber Inc. as follows: (i) to pay fees and expenses of approximately $                in connection with this offering and the Reorganization Transactions; (ii) to repay $                of the outstanding borrowings under our Secured Credit Facility and (iii) for general corporate purposes. Weber HoldCo LLC will not receive any proceeds from the purchase of LLC Units from certain Pre-IPO LLC Members by us or from the repurchase of shares of Class A common stock by us. See “Use of Proceeds.”

Effect of the Reorganization Transactions and this Offering

The Reorganization Transactions are intended to create a holding company that will facilitate public ownership of, and investment in, the Company and are structured in a tax-efficient manner for the Pre-IPO LLC Members. The Pre-IPO LLC Members desire that their investment in the Company maintains its existing tax treatment as a partnership for U.S. federal income tax purposes and, therefore, will continue to hold their ownership interests in Weber HoldCo LLC until such time in the future as they may elect to cause us to redeem or exchange their LLC Units for a corresponding number of shares of our Class A common stock.

We estimate that the offering expenses (other than the underwriting discounts and commissions) will be approximately $                 million. See “Use of Proceeds.”

 

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The diagram below depicts our Organizational Structure immediately following the Reorganization Transactions, this offering and the application of the net proceeds from this offering, assuming an initial public offering price of $                 per share (the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus) and no exercise of the underwriters’ option to purchase additional shares. This chart is provided for illustrative purposes only and does not purport to represent all legal entities within our Organizational Structure.

 

 

LOGO

 

(1)

Also includes Blocker equityholders that will receive              shares of Class A common stock in the Reorganization Transactions.

Upon completion of the transactions described above, this offering and the application of the net proceeds from this offering:

 

   

Weber Inc. will be appointed as the sole managing member of Weber HoldCo LLC and will hold                  LLC Units, constituting     % of the outstanding economic interests in Weber HoldCo LLC (or                  LLC Units, constituting     % of the outstanding economic interests in Weber HoldCo LLC if the underwriters exercise their option to purchase additional shares of Class A common stock in full);

 

   

the Pre-IPO LLC Members will hold (i)                  LLC Units, representing approximately     % of the economic interest in Weber HoldCo LLC (or     % if the underwriters exercise their option to

 

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purchase additional shares of Class A common stock in full) and (ii) through their ownership of Class B common stock, approximately     % of the combined voting power of our common stock (or     % if the underwriters exercise their option to purchase additional shares of Class A common stock in full). Additionally, Blocker equityholders will hold     % of the combined voting power of our common stock (or     % if the underwriters exercise their option to purchase additional shares of Class A common stock in full). There are no limitations in the Amended LLC Agreement on the number of LLC Units issuable in the future and we are not required to own a majority of LLC Units; and

 

   

Investors in this offering will collectively beneficially own (i)                  shares of our Class A common stock, representing approximately     % of the combined voting power in us (or                  shares and     %, respectively, if the underwriters exercise their option to purchase additional shares of Class A common stock in full) and (ii) through our ownership of LLC Units, indirectly will hold approximately                % of the economic interest in Weber HoldCo LLC (or                 % if the underwriters exercise their option to purchase additional shares of Class A common stock in full).

Holding Company Structure and the Tax Receivable Agreement

We are a holding company, and immediately after the consummation of the Reorganization Transactions and this offering our principal asset will be our ownership interests in Weber HoldCo LLC. The number of LLC Units that we will own directly in the aggregate at any time will equal the aggregate number of outstanding shares of our Class A common stock. The economic interest represented by each LLC Unit that we own directly will correspond to one share of our Class A common stock, and the total number of LLC Units owned directly by us and the holders of our Class B common stock at any given time will equal the sum of the outstanding shares of all classes of our common stock.

We do not intend to list our Class B common stock on any stock exchange.

Acquisitions by Weber Inc. of LLC Units from the Pre-IPO LLC Members in connection with this offering and future taxable redemptions or exchanges by the Pre-IPO LLC Members of LLC Units for shares of our Class A common stock are expected to produce tax basis adjustments to the assets of Weber HoldCo LLC that will be allocated to us and thus produce favorable tax attributes. These tax attributes would not be available to us in the absence of those transactions.

We intend to enter into the Tax Receivable Agreement with the Pre-IPO LLC Members that will provide for the payment by us to the Pre-IPO LLC Members of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize as a result of (i) Weber Inc.’s allocable share of certain existing tax basis in tangible and intangible assets related to certain transactions that resulted in a step-up in Weber HoldCo LLC’s tax basis, (ii) any increase in tax basis in Weber-Stephen Products LLC’s assets resulting from (a) acquisitions by Weber Inc. of LLC Units from the Pre-IPO LLC Members in connection with this offering, (b) the acquisition of LLC Units from the Pre-IPO LLC Members using the net proceeds from any future offering, (c) future taxable redemptions or exchanges by the Pre-IPO LLC Members of LLC Units for shares of our Class A common stock or cash or (d) payments under the Tax Receivable Agreement and (iii) tax benefits related to imputed interest resulting from payments made under the Tax Receivable Agreement. Payments under the Tax Receivable Agreement will be based on the tax reporting positions we determine, and the IRS or another tax authority may challenge all or part of the deductions, existing tax basis, tax basis increases or other tax attributes subject to the Tax Receivable Agreement, and a court could sustain such challenge. Although we are not aware of any issue that would cause the IRS to challenge the existing tax basis, tax basis increases or other benefits arising under the Tax Receivable Agreement, the Pre-IPO LLC Members will not reimburse us for any payments previously made if such

 

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basis increases or other benefits are subsequently disallowed, except that excess payments made to the Pre-IPO LLC Members will be netted against future payments otherwise to be made under the Tax Receivable Agreement, if any, after our determination of such excess. As a result, in such circumstances we could make future payments to the Pre-IPO LLC Members under the Tax Receivable Agreement that are greater than our actual cash tax savings and may not be able to recoup those payments, which could negatively impact our liquidity. See “Risk Factors—We will be required to pay the Pre-IPO LLC Members for certain tax benefits we may claim, and the amounts we may pay could be significant.”

Our obligations under the Tax Receivable Agreement will also apply with respect to any person who is issued LLC Units in the future and who becomes a party to the Tax Receivable Agreement.

 

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USE OF PROCEEDS

We estimate that our net proceeds from this offering will be approximately $                , after deducting underwriting discounts and commissions but before deducting estimated offering expenses, based on an assumed initial offering price of $                per share (the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus) and assuming the underwriters’ option to purchase additional shares is not exercised. If the underwriters exercise their option to purchase additional shares in full, we expect to receive approximately $                of net proceeds based on an assumed initial offering price of $                per share (the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus).

We estimate that the offering expenses (other than the underwriting discount and commissions) will be approximately $                . See “Underwriting.”

We will use all of the net proceeds from this offering (including net proceeds received if the underwriters exercise their option to purchase additional shares of Class A common stock) (i) to acquire                newly issued LLC Units from Weber HoldCo LLC, (ii) to acquire                  LLC Units from certain Pre-IPO LLC Members, and (iii) to repurchase                  shares of the Class A common stock received by the Blocker equityholders in connection with the merger of Weber Merger Sub, LLC with and into Blocker, in each case at a price per LLC Unit and share of Class A common stock equal to the initial public offering price of our Class A common stock minus underwriting discounts. See “Organizational Structure—The Reorganization Transactions.”

We will cause Weber HoldCo LLC to use the proceeds from the sale of the LLC Units to Weber Inc. as follows: (i) to pay fees and expenses of approximately $                in connection with this offering and the Reorganization Transactions; (ii) to repay $                of the outstanding borrowings under our Secured Credit Facility, as defined below, and (iii) for general corporate purposes.

The Secured Credit Facility consists of a term loan that matures on October 30, 2027 and a revolving credit facility that matures by October 20, 2025. Proceeds from the term loan and revolving facility were used to pay off our prior credit agreement, effect a portion of a special dividend, engage in business acquisition and equity repurchase activities, pay fees and expenses in connection with the foregoing and for working capital and general corporate purposes. Borrowings under the Secured Credit Facility bear interest at a rate equal to, at our option, either (i) LIBOR for the relevant interest period, adjusted for statutory reserve requirements (subject to a floor of 0.00% per annum for all revolving loans and a 0.75% floor for the term loan), plus an applicable margin or (ii) a base rate equal to the highest of (a) the rate of interest publicly announced from time to time by the administrative agent as its “prime rate”, (b) the federal funds effective rate plus 0.50% and (c) adjusted LIBOR for an interest period of one month plus 1.00% (subject to a floor of 0.00% per annum), in each case, plus an applicable margin. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Overview” for additional information about the Secured Credit Facility.

Certain of the underwriters and/or their respective affiliates may be lenders under the Secured Credit Facility and, as a result, may receive a portion of the net proceeds from this offering that we intend to allocate to the repayment of such borrowings, on a pro rata basis across all applicable lenders thereunder. See “Underwriting.”

Weber HoldCo LLC will not receive any proceeds from purchase of LLC Units from certain Pre-IPO LLC Members by us or the repurchase of shares of Class A common stock by us.

 

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If the underwriters exercise their option to purchase additional shares of Class A common stock in full, we estimate that our additional net proceeds will be approximately $                . We will use the additional net proceeds we receive pursuant to any exercise of the underwriters’ option to purchase additional shares of Class A common stock to purchase LLC Units from certain Pre-IPO LLC Members and/or to repurchase shares of the Class A common stock received by the Blocker equityholders in connection with the merger of Weber Merger Sub, LLC with and into Blocker, in each case at a price per LLC Unit and share of Class A common stock equal to the initial public offering price of our Class A common stock minus underwriting discounts. As a result, Weber HoldCo LLC will not receive any additional proceeds from any exercise of the underwriters’ option to purchase additional shares of Class A common stock.

Each $1.00 increase (decrease) in the assumed initial public offering price of $                per share would increase (decrease) the amount of proceeds available to us from this offering by approximately $                , assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions. Because we intend to purchase newly issued LLC Units from Weber HoldCo LLC as described above at a price per LLC Unit and share of Class A common stock equal to the initial public offering price of our Class A common stock minus underwriting discounts, any decrease in the assumed initial public offering price of $                 per share, would decrease the amount of proceeds available to Weber HoldCo LLC to repay outstanding borrowings under our Secured Credit Facility. Each 1,000,000 share increase (decrease) in the number of shares offered by us would increase (decrease) the amount of proceeds available to us from this offering by approximately $                , assuming the assumed initial public offering price of $                per share as set forth on the cover page of this prospectus remains the same, and after deducting the estimated underwriting discounts and commissions.

 

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DIVIDEND POLICY

Following this offering and subject to funds being legally available, we intend to cause Weber HoldCo LLC to make pro rata distributions to the holders of LLC Units and us in an amount at least sufficient to allow us and the holders of LLC Units to pay all applicable taxes, to make payments under the Tax Receivable Agreement we will enter into with the Pre-IPO LLC Members and to pay our corporate and other overhead expenses. The declaration and payment of any dividends by Weber Inc. will be at the sole discretion of our board of directors, which may change our dividend policy at any time. Our board of directors will take into account:

 

   

general economic and business conditions;

 

   

our financial condition and operating results;

 

   

our available cash and current and anticipated cash needs;

 

   

our capital requirements;

 

   

contractual, legal, tax and regulatory restrictions and implications on the payment of dividends by us to our stockholders or by our subsidiaries (including Weber HoldCo LLC) to us; and

 

   

such other factors as our board of directors may deem relevant.

Weber Inc. will be a holding company and will have no material assets other than its ownership of LLC Units in Weber HoldCo LLC, and as a consequence, our ability to declare and pay dividends to the holders of our Class A common stock will be subject to the ability of Weber HoldCo LLC to provide distributions to us. If Weber HoldCo LLC makes such distributions, the holders of LLC Units will be entitled to receive equivalent distributions from Weber HoldCo LLC. However, because we must pay taxes, make payments under the Tax Receivable Agreement and pay our expenses, amounts ultimately distributed as dividends to holders of our Class A common stock are expected to be less than the amounts distributed by Weber HoldCo LLC to the Pre-IPO LLC Members on a per share basis. See “Certain Relationships and Related Party Transactions—Tax Receivable Agreement.”

Assuming Weber HoldCo LLC makes distributions to its members in any given year, the determination to pay dividends, if any, to our Class A common stockholders out of the portion, if any, of such distributions remaining after our payment of taxes, Tax Receivable Agreement payments and expenses (any such portion, an “excess distribution”) will be made by our board of directors. Because our board of directors may determine to pay or not pay dividends to our Class A common stockholders, our Class A common stockholders may not necessarily receive dividend distributions relating to excess distributions, even if Weber HoldCo LLC makes such distributions to us.

 

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and capitalization as of March 31, 2021:

 

   

on an actual basis for Weber-Stephen Products LLC; and

 

   

a pro forma basis for Weber Inc., giving effect to the Reorganization Transactions, the April Transactions and the other matters described under “Unaudited Pro Forma Consolidated Financial Information,” which includes application of the proceeds from this offering as described in “Use of Proceeds” based upon an assumed initial public offering price of $                per share (the midpoint of the range set forth on the cover page of this prospectus).

This table should be read in conjunction with “Organizational Structure,” “Use of Proceeds,” “Unaudited Pro Forma Consolidated Financial Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Description of Capital Stock” and the audited and unaudited consolidated financial statements of Weber-Stephen Products LLC and subsidiaries and related notes thereto included elsewhere in this prospectus.

 

(Dollars in thousands, except unit and share information)

   Weber-Stephen
Products LLC
Actual
    Weber Inc.
Pro forma(3)
 

Cash and cash equivalents

   $ 379,939    
  

 

 

   

 

 

 

Indebtedness:

    

Long-term debt (including the current portion thereof and net of unamortized debt issuance costs)(1)

     1,223,060    

Payable to related parties pursuant to the Tax Receivable Agreement

        

Equity:

    

Class A common stock, par value $0.001 per share; no shares authorized, no shares issued and outstanding, actual;                 shares outstanding,                 shares issued and outstanding, pro forma

        

Class B common stock, par value $0.00001 per share; no shares authorized, no shares issued and outstanding, actual;                 shares outstanding,                 shares issued and outstanding, pro forma

        

Additional paid in capital

        

Members’ deficit, 551,842 units authorized, issued and outstanding, actual; no units outstanding or issued and outstanding, pro forma

    
(538

 

Accumulated other comprehensive loss

     (42,623  

Retained earnings (deficit)

     69,875    
  

 

 

   

 

 

 

Total members’/stockholders’ equity (deficit)

     26,714    

Noncontrolling interest(2)

                         
  

 

 

   

 

 

 

Total capitalization

        
  

 

 

   

 

 

 

 

(1)

On October 30, 2020, the Company entered into the Secured Credit Facility with a term loan of $1,250.0 million and a revolving credit facility with a maximum commitment of $300.0 million. The term loan matures on October 30, 2027 and the revolving facility matures by October 30, 2025. As of the date of this prospectus, the Company had $                of capacity under the revolving facility.

(2)

On a pro forma basis, includes the Weber-Stephen Products LLC interests not owned by us, which represents        % of Weber HoldCo LLC’s LLC Units. Certain Pre-IPO LLC Members will

 

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  hold the noncontrolling economic interests in Weber-Stephen Products LLC. Weber Inc. will hold        % of the economic interest in Weber-Stephen Products LLC.
(3)

The pro forma cash and cash equivalents and capitalization presented do not give effect to our acquisition of substantially all of the assets of R. McDonald Co. Pty. Ltd. in April 2021, which we acquired using approximately $29 million in cash and $14 million in equity. See ”Prospectus Summary—Recent Developments—R. McDonald Acquisition” and note 17 to our unaudited consolidated financial statements for the six months ended March 31, 2021 included elsewhere in this prospectus.

A $1.00 increase or decrease in the assumed initial public offering price of $                per share (which is the midpoint of the price range set forth on the cover page of this prospectus) would increase or decrease each of cash and cash equivalents, total stockholder’s equity and total capitalization on a pro forma basis by approximately $                million, assuming the number of shares of Class A common stock offered, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Each 1,000,000 increase or decrease in the number of shares of Class A common stock offered in this offering would increase or decrease each of cash and cash equivalents, total stockholder’s equity and total capitalization on a pro forma basis by approximately $                million, based on an assumed initial public offering price of $                per share, which is the midpoint of the estimated public offering price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

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UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

The unaudited pro forma consolidated balance sheet as of March 31, 2021, and the unaudited pro forma consolidated statements of income for the fiscal year ended September 30, 2020 and the six months ended March 31, 2021, present our financial position and results of operations after giving effect to the following pro forma transactions (the “Pro Forma Transactions”):

 

   

the Reorganization Transactions described under “Organizational Structure—Reorganization Transactions”, which include but are not limited to:

 

   

the recognition of a noncontrolling interest in Weber-Stephen Products LLC held by the Pre-IPO LLC Members;

 

   

the entry into the Tax Receivable Agreement;

 

   

the issuance of                shares of our Class B common stock in an amount equal to the number of LLC Units held by each Pre-IPO LLC Member (other than Blocker);

 

   

the issuance of                shares of our Class A common stock to the purchasers in this offering in exchange for net proceeds of approximately $                , assuming that the shares are offered at $                per share (the midpoint of the price range listed on the cover page of this prospectus), after deducting underwriting discounts and commissions but before deducting estimated offering expenses;

 

   

the application by Weber Inc. of the net proceeds from this offering (i) to acquire                newly issued LLC Units from Weber HoldCo LLC, (ii) to acquire LLC Units from certain existing equityholders and (iii) to repurchase                  shares of the Class A common stock received by the Blocker equityholders in connection with the merger of Weber Merger Sub, LLC, in each case at a price per LLC Unit and share of Class A common stock equal to the initial public offering price of our Class A common stock minus underwriting discounts;

 

   

the application by Weber HoldCo LLC of a portion of the proceeds of the sale of LLC Units to Weber Inc. to pay fees and expenses of approximately $                in connection with this offering; and

 

   

the application by Weber HoldCo LLC of a portion of the proceeds of the sale of LLC Units to Weber Inc. to repay $                of indebtedness.

 

   

The provision for federal and state income taxes of Weber Inc. as a taxable corporation at an effective rate of        % for the fiscal year ended September 30, 2020 and for the six months ended March 31, 2021, respectively.

 

   

The repurchase of LLC Unit Interests from WSP Investment LLC in the amount of $188.7 million and the dividend to Weber-Stephen Products LLC Unit Holders in the amount of $261.3 million (collectively, the “April Transactions”). See “Prospectus Summary—Recent Developments—April Transactions.”

The unaudited pro forma consolidated statements of income for the fiscal year ended September 30, 2020 and the six months ended March 31, 2021 give effect to the Pro Forma Transactions as if the Pro Forma Transactions had occurred on October 1, 2019. The unaudited pro forma consolidated balance sheet as of March 31, 2021, gives effect to the Pro Forma Transactions as if the Pro Forma Transactions occurred on March 31, 2021.

Our historical consolidated financial information has been derived from Weber-Stephen Products LLC’s consolidated financial statements and accompanying notes to the consolidated financial statements included elsewhere in this prospectus. Weber Inc. was formed on April 1, 2021 and will

 

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have no material assets or results of operations until the completion of this offering. Therefore, Weber Inc.’s historical financial information is not included in the unaudited pro forma consolidated financial information.

The presentation of the unaudited pro forma consolidated financial information is prepared in conformity with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses,” using the assumptions set forth in the notes to the unaudited pro forma consolidated financial information.

We based the pro forma adjustments on available information and on assumptions that we believe are reasonable under the circumstances in order to reflect, on a pro forma basis, the impact of the Pro Forma Transactions on the historical financial information of Weber-Stephen Products LLC. See the notes to unaudited pro forma consolidated financial information below for a discussion of assumptions made. As the unaudited pro forma consolidated financial information has been prepared based on these assumptions, the final amounts recorded may differ materially from the information presented. The unaudited pro forma consolidated financial information does not purport to be indicative of our results of operations or financial position had the relevant transactions occurred on the dates assumed and does not project our results of operations or financial position for any future period or date. The unaudited pro forma consolidated financial information does not reflect any anticipated synergies, operating efficiencies, tax savings, or cost savings.

For purposes of the unaudited pro forma consolidated financial information, we have assumed that we will issue shares of Class A common stock at a price per share of $                (which is the midpoint of the estimated public offering price range set forth on the cover of this prospectus), and, as a result, immediately following the completion of this offering, the ownership percentage represented by LLC Units not held by us will be        %, and the net income attributable to LLC Units not held by us will accordingly represent        % of our net income. Except as otherwise indicated, the unaudited pro forma consolidated financial information presented assumes no exercise by the underwriters of their option to purchase additional shares of Class A common stock.

As a public company, we will be implementing additional procedures and processes for the purpose of addressing the standards and requirements applicable to public companies. We expect to incur additional annual expenses related to these steps and, among other things, additional directors’ and officers’ liability insurance, director fees, reporting requirements of the SEC, transfer agent fees, hiring additional accounting, legal and administrative personnel, increased auditing and legal fees and similar expenses. We have not included any pro forma adjustments relating to these expenses.

The unaudited pro forma consolidated financial information should be read together with “Organizational Structure,” “Capitalization,” “Selected Historical Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the audited consolidated financial statements of Weber-Stephen Products LLC and subsidiaries and related notes thereto included elsewhere in this prospectus.

 

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UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

As of March 31, 2021

 

(Dollars in thousands, except unit and share information)

   Weber-Stephen
Products
LLC(1)
    Pro Forma
Transaction
Adjustments
    Weber Inc.
Pro Forma
 

Assets

      

Current assets:

      

Cash and cash equivalents

   $ 379,939                    (2)                    
                    (3)   
                    (4)   
                    (5)   
                    (6)   
                    (10)   

Accounts receivable:

      

Accounts receivable, less allowance of $2,468 at March 31, 2021

     483,953      

Inventories, net

     334,404      

Prepaid expenses and other current assets

     41,300      
  

 

 

   

 

 

   

 

 

 

Total current assets

     1,239,596      

Property, equipment and leasehold improvements, net

     104,616      

Operating lease right-of-use assets

     44,048      

Other long-term assets

     47,214      

Deferred tax asset

                        (7)   
                    (8)   

Trademarks, net

     359,515      

Other intangible assets, net

     139,500      

Goodwill

     91,708      
  

 

 

   

 

 

   

 

 

 

Total assets

   $ 2,026,197      
  

 

 

   

 

 

   

 

 

 

Liabilities and members’ equity (deficit)

      

Current liabilities:

      

Trade accounts payable

   $ 384,071      

Accrued expenses

     174,762                    (6)   

Income taxes payable

     6,846      

Current portion of long-term debt and other borrowings

     12,500                    (6)   

Current portion of long-term financing obligation

     552      
  

 

 

   

 

 

   

 

 

 

Total current liabilities

     578,731      

Long-term debt, less current portion

     1,210,560                    (6)   

Long-term financing obligation, less current portion

     38,694      

Non-current operating lease liabilities

     33,445      

Other long-term liabilities

     138,053      

Payable to related parties pursuant to the Tax Receivable Agreement

                    (8)   
  

 

 

   

 

 

   

 

 

 

Total liabilities

     1,999,483      

Commitments and Contingencies

      

Class A common stock, par value $0.001 per share

                    (2)   

Treasury stock

                    (4)   

Class B common stock, par value $0.00001 per share

                    (3)   

Additional paid in capital

                    (2)   
                    (5)   
                    (8)   
                    (9)   
      

Members’ deficit, 551,842 units authorized, issued and outstanding as of March 31, 2021

     (538  

 

            

(4)(10) 

 

Accumulated other comprehensive loss

     (42,623                  (9)   

Retained earnings (deficit)

                    (9)   
     69,875                    (10)   
  

 

 

   

 

 

   

 

 

 

Total members’/stockholders’ equity (deficit)

     26,714      

Noncontrolling interest

                    (9)   
  

 

 

   

 

 

   

 

 

 

Total members’ / stockholder’s equity (deficit)

     26,714      
  

 

 

   

 

 

   

 

 

 

Total liabilities and members’ / stockholder’s equity (deficit)

   $ 2,026,197      
  

 

 

   

 

 

   

 

 

 

 

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NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2021

 

(1)

Weber Inc. was incorporated as a Delaware corporation on April 1, 2021, and will have no material assets or results of operations until the completion of this offering and therefore its historical financial position is not shown in a separate column in this unaudited pro forma consolidated balance sheet. This column represents the consolidated historical financial statements of Weber-Stephen Products LLC, the predecessor for accounting purposes.

 

(2)

Reflects the issuance of Class A common stock to the public pursuant to this offering. We estimate that the net proceeds to us from this offering will be approximately $                 million (or $                 million if the underwriters exercise in full their option to purchase additional shares of Class A common stock), based on an assumed initial public offering price of $                 per share, which is the midpoint of the estimated public offering price range set forth on the cover page of this prospectus, after deducting $                 of assumed underwriting discounts and commissions and estimated offering expenses.

 

(3)

Reflects the issuance of Class B common stock to Pre-IPO LLC Members, on a one-to-one basis with the number of LLC Units they own, in exchange for cash consideration of $                 million equal to the par value of the Class B common stock issued, as described in greater detail under “Organizational Structure”.

 

(4)

Reflects the application of net proceeds from the issuance of Class A common stock to purchase $                 of newly issued LLC units from certain Pre-IPO LLC members, as well as to purchase $                 of Class A common stock received by the Blocker equityholders in connection with the merger of Weber Merger Sub, LLC with and into Blocker.

 

(5)

Reflects direct and incremental transaction costs incurred related to the Reorganization Transactions and this offering for certain legal, accounting and other related expenses. Upon completion of this offering, these costs will be charged against the proceeds from this offering with a corresponding reduction to additional paid in capital.

 

(6)

Reflects the application by Weber HoldCo LLC of a portion of the proceeds of the sale of LLC Units to Weber Inc. to repay $                 of indebtedness and $                 of accrued interest under our Secured Credit Facility.

 

(7)

Weber Inc. is subject to U.S. federal income taxes, in addition to state, local and foreign taxes. This adjustment reflects the recognition of deferred taxes in connection with the Reorganization Transactions assuming the federal rates currently in effect and the highest statutory rates apportioned to each state, local and foreign jurisdiction.

We have recorded a pro forma deferred tax adjustment net of valuation allowance of $                million. The net deferred tax asset includes (i) $                million related to temporary differences in the book basis as compared to the tax basis of our Company’s investment in Weber HoldCo LLC and (ii) $                million related to tax benefits from future deductions attributable to payments under the Tax Receivable Agreement as described further in note (8). A valuation allowance of $                million has been recorded for those deferred tax assets which Weber Inc. has determined are not more likely than not to be realized. Weber Inc. has determined it is more likely than not the remaining $                million of deferred tax assets will result in ordinary income tax deductions that will be realized based on projections of future taxable income. Weber Inc. will continue to assess all positive and negative evidence and will adjust the valuation allowance to the extent it is more likely than not its assessment changes.

 

(8)

As part of the Reorganization Transactions, Weber Inc. will enter into the Tax Receivable Agreement, pursuant to which Weber Inc. will pay to the Pre-IPO LLC Members and any future party to the Tax Receivable Agreement 85% of the amount of cash savings, if any, in U.S.

 

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  federal, state, and local income tax or franchise tax that it actually realizes (or is deemed to realize in certain circumstances) in periods after this offering as (i) any increase in tax basis in Weber HoldCo LLC’s assets resulting from (a) acquisitions by Weber Inc. of LLC Units from certain existing equityholders in connection with this offering, (b) the acquisition of LLC Units using the net proceeds from any future offering, (c) redemptions or exchanges by the Pre-IPO LLC Members of LLC Units and the corresponding number of shares of Class B common stock for shares of our Class A common stock or cash or (d) payments under the Tax Receivable Agreement, and (ii) tax benefits related to imputed interest resulting from payments made under the Tax Receivable Agreement.

The Tax Receivable Agreement will be accounted for as a contingent liability, with amounts accrued when considered probable and reasonably estimable. We will record a $                million liability based on the Company’s estimate of the aggregate amount that it will pay to the Pre-IPO LLC Members under the Tax Receivable Agreement as a result of the Reorganization Transactions. As mentioned in note (7) above, we will record an increase of $                million in deferred tax assets related to tax benefits from future deductions attributable to payments under the Tax Receivable Agreement as a result of the Reorganization Transactions. Additionally, we will record a decrease to additional paid-in capital of $                million, which is equal to the difference between the increase in deferred tax assets and the increase in liabilities due to existing owners under the Tax Receivable Agreement as a result of the Reorganization Transactions.

No adjustment has been made to reflect future exchanges by Pre-IPO LLC Members (or their transferees of LLC Units or other assignees) of LLC Units for cash or shares of our Class A common stock, as applicable.

 

(9)

Upon completion of the Reorganization Transactions, we will become the sole managing member of Weber HoldCo LLC. Although we will indirectly have a minority economic interest in Weber-Stephen Products LLC, we will indirectly have the sole voting interest in, and control the management of, Weber-Stephen Products LLC. As a result, we will consolidate the financial results of Weber-Stephen Products LLC and will report a noncontrolling interest related to the LLC Units held by the Pre-IPO LLC Members on our consolidated balance sheet. The computation of the noncontrolling interest following the consummation of this offering, based on the assumed initial public offering price, is as follows:

 

     Units      Percentage  

Interest in Weber-Stephen Products LLC indirectly held by Weber Inc.

                             

Noncontrolling interest in Weber-Stephen Products LLC indirectly held by
Pre-IPO LLC Members

            
  

 

 

    

 

 

 

Total

        100
  

 

 

    

 

 

 

The adjustments to (i) noncontrolling interest of $                million, (ii) additional paid in capital of $                million, (iii) retained earnings of $                million and (iv) accumulated other comprehensive income of $                million reflect the proportional interest in the pro forma consolidated total equity of Weber Inc. owned by Weber-Stephen Products LLC.

If the underwriters were to exercise their option to purchase additional shares of our Class A common stock, in full Weber Inc. would own                % of the economic interest of Weber HoldCo LLC and the Pre-IPO LLC Members would own the remaining                % of the economic interest of Weber HoldCo LLC.

Following the consummation of this offering, the LLC Units held by the Pre-IPO LLC Members, representing the noncontrolling interest, will be redeemable at the election of the members, for shares of Class A common stock on a one-for-one basis.

 

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(10)

Reflects the consummation of two transactions which occurred in the month of April 2021:

 

   

The repurchase of LLC Unit Interests from WSP Investments LLC in the amount of $188.7 million; and

 

   

The dividend to Weber-Stephen Products LLC Unit Holders in the amount of $261.4 million.

 

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UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME

Six months ended March 31, 2021

 

(Dollars in thousands, except unit and share information)

   Weber-Stephen
Products
LLC(1)
    Pro Forma
Transaction
Adjustments
    Weber Inc.
Pro Forma
 

Net sales

   $ 963,309                                        

Cost of goods sold

     542,782      
  

 

 

   

 

 

   

 

 

 

Gross profit

     420,527      

Operating expenses:

      

Selling, general and administrative

     297,986      

Amortization of intangible assets

     6,864      

Gain on disposal of assets held for sale

     (5,185    
  

 

 

   

 

 

   

 

 

 

Income from operations

     120,862      

Foreign currency loss (gain)

     (14    

Interest income

     (425    

Interest expense

     32,174                    (2)   

Loss from early extinguishment of debt

     5,448      
  

 

 

   

 

 

   

 

 

 

Income before taxes

     83,679      

Income taxes

     15,389                    (3)   

Loss (gain) from investments in unconsolidated affiliates

     (5,505    
  

 

 

   

 

 

   

 

 

 

Net income

     73,795      

Earnings allocated to participating securities

     (610    
  

 

 

   

 

 

   

 

 

 

Net income attributable to common members

   $ 73,185      

Net income attributable to noncontrolling interests

                    (4)   

Net income attributable to controlling interests

   $        

Net income per common unit

      

Basic

   $ 132.62      

Diluted

   $ 132.62      

Weighted average common units outstanding

      

Basic

     551,836      

Diluted

     551,836      

Pro forma net income (loss) per share attributable to common stockholders

      

Basic

                    (5)   

Diluted

                    (5)   

Weighted-average shares used in computing pro forma net income (loss) per share attributable to common stockholders

      

Basic

                    (5)   

Diluted

                    (5)   

 

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UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME

Fiscal year ended September 30, 2020

 

(Dollars in thousands, except unit and share information)

   Weber-Stephen
Products
LLC(1)
    Pro Forma
Transaction
Adjustments
    Weber Inc.
Pro Forma
 

Net sales

   $ 1,525,260                                        

Cost of goods sold

     915,586      
  

 

 

   

 

 

   

 

 

 

Gross profit

     609,674      

Operating expenses:

      

Selling, general and administrative

     444,975      

Amortization of intangible assets

     13,235      
  

 

 

   

 

 

   

 

 

 

Income from operations

     151,464      

Foreign currency loss (gain)

     5,081      

Interest income

     (1,270    

Interest expense

     40,357                    (2)   
  

 

 

   

 

 

   

 

 

 

Income before taxes

     107,296      

Income taxes

     13,812                    (3)   

Loss (gain) from investments in unconsolidated affiliates

     4,604      
  

 

 

   

 

 

   

 

 

 

Net income

     88,880      

Earnings allocated to participating securities

     (473    
  

 

 

   

 

 

   

 

 

 

Net income attributable to common members

   $ 88,407      

Net income attributable to noncontrolling interests

                        (4)   

Net income attributable to controlling interests

   $        

Net income per common unit

      

Basic

   $ 160.23      

Diluted

   $ 160.23      

Weighted average common units outstanding

      

Basic

     551,763      

Diluted

     551,763      

Pro forma net income (loss) per share attributable to common stockholders

      

Basic

                    (5)   

Diluted

                    (5)   

Weighted-average shares used in computing pro forma net income (loss) per share attributable to common stockholders

      

Basic

                    (5)   

Diluted

                    (5)   

 

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NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME

Fiscal year ended September 30, 2020 and six months ended March 31, 2021

 

(1)

Weber Inc. was incorporated as a Delaware corporation on April 1, 2021, and will have no material assets or results of operations until the completion of this offering and therefore its historical financial position is not shown in a separate column in the unaudited pro forma consolidated statements of income. This column represents the consolidated financial statements of Weber-Stephen Products LLC, the predecessor for accounting purposes.

 

(2)

Reflects a reduction to interest expense from repayment of the outstanding borrowings under our Secured Credit Facility.

 

(3)

Following the Reorganization Transactions and offering, Weber Inc. will be subject to U.S. federal income taxes, in addition to state, local and foreign taxes. As a result, the unaudited pro forma consolidated statements of income reflects an adjustment to our provision for corporate income taxes to reflect a pro forma tax rate of %, which includes a provision for U.S. federal income taxes and assumes the highest statutory rates apportioned to each state, local and foreign jurisdiction. Weber-Stephen Products LLC has been, and will continue to be, treated as a partnership for U.S. federal and state income tax purposes. As such, Weber-Stephen Products LLC’s profits and losses will flow through to its partners, including Weber Inc., and are generally not subject to tax at the Weber-Stephen Products LLC level.

 

     Fiscal year ended
September 30, 2020
     Six months ended
March 31, 2021
 

Pro forma income before taxes

   $                  $              

Historical net income attributable to noncontrolling interest

     
  

 

 

    

 

 

 

Pro forma income before taxes attributable to controlling interest

     

Pro forma tax rate

     

Pro forma income tax expense

     

Historical income tax expenses

     

Pro forma income tax expense adjustment

   $        $    
  

 

 

    

 

 

 

 

(4)

Upon completion of the Reorganization Transactions, Weber Inc. will become the sole managing member of Weber HoldCo LLC through the Amended LLC Agreement. The Weber-Stephen Products LLC capital structure will be modified by converting the interests currently held by the Pre-IPO LLC Members into a single new class of non-voting common interest units of Weber HoldCo LLC, a recently formed entity under which Weber-Stephen Products LLC will be a wholly owned subsidiary. In addition, the Amended LLC Agreement will provide for Weber Inc. to manage and operate the business and control the strategic decisions and day-to-day operations of Weber-Stephen Products LLC via Weber HoldCo LLC. Although we will have a minority economic interest in Weber-Stephen Products LLC (via Weber HoldCo LLC), we will have the sole voting interest in, and control the management of, Weber HoldCo LLC. Following this offering, assuming the underwriters do not exercise their option to purchase additional shares of Class A common stock, Weber Inc. will indirectly own        % of the economic interest of Weber-Stephen Products LLC and the Pre-IPO LLC Members will indirectly own the remaining        % of the economic interest of Weber-Stephen Products LLC. Net income attributable to noncontrolling interests will represent        % of the income before income taxes of Weber-Stephen Products LLC upon completion of this offering. If the underwriters exercise their option to purchase additional shares of our Class A common stock in full, Weber Inc. will indirectly own        % of the economic interest of Weber-Stephen Products LLC and the Pre-IPO LLC Members will indirectly own the

 

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  remaining        % of the economic interest of Weber-Stephen Products LLC, and net income attributable to noncontrolling interests would represent        % of the income before income taxes of Weber-Stephen Products LLC upon completion of this offering.

The computation of the pro forma income attributable to noncontrolling interest, following the consummation of this offering, is as follows:

 

     Fiscal year ended
September 30, 2020
    Six months ended
March 31, 2021
 

Income before provision (benefit) for income taxes

   $                 $              

Pre-IPO LLC Members’ indirect economic interest in Weber-Stephen Products LLC

                  
  

 

 

   

 

 

 

Income attributable to noncontrolling interest

   $       $    

 

(5)

The weighted average number of shares underlying the basic income per share calculation reflects                 shares of Class A common stock outstanding after the offering as they are the only outstanding shares which participate in distributions or dividends by Weber Inc. Pro forma diluted income per share is computed by adjusting pro forma net income attributable to Weber Inc. and the weighted average shares of Class A common stock outstanding to give effect to potentially dilutive securities that qualify as participating securities using the treasury stock method, as applicable. Shares of Class B common stock are not participating securities and therefore are not included in the calculation of pro forma basic income per share. LLC Units, together with an equal number of shares of Class B common stock, may be exchanged, at our option, for shares of our Class A common stock or for cash. The diluted weighted average share calculation assumes that certain equity awards were issued and outstanding at the beginning of the period. The following table sets forth a reconciliation of the numerators and denominators used to compute pro forma basic and diluted income per share:

 

     Fiscal year ended
September 30, 2020
     Six months ended
March 31, 2021
 

Income per share of common stock

     

Numerator:

     

Net income attributable to Weber Inc’s shareholders (basic and diluted)

   $                      $                  

Denominator:

     

Weighted average of shares of common stock outstanding (basic)

     

Incremental common shares attributable to dilutive instruments

     

Weighted average of shares of common stock outstanding (diluted)

     

Basic income per shares

   $      $  

Diluted income per share

     

 

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DILUTION

If you invest in our Class A common stock, you will experience dilution to the extent of the difference between the initial public offering price per share of our Class A common stock and the pro forma net tangible book value per share of our Class A common stock. Dilution results from the fact that the per share offering price of the Class A common stock is substantially in excess of the pro forma net tangible book value per share attributable to the Pre-IPO LLC Members.

We have presented dilution in pro forma net tangible book value per share of Class A common stock to investors in this offering assuming that all of the holders of LLC Units redeemed or exchanged their LLC Units for a corresponding number of newly-issued shares of Class A common stock, or the “Assumed Redemption”, in order to more meaningfully present the dilutive impact on the investors in this offering.

Our pro forma net tangible book value as of March 31, 2021 would have been approximately $                , or $                 per share of our Class A 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, in each case after giving effect to the Reorganization Transactions, assuming that the Pre-IPO LLC Members redeem or exchange all of their LLC Units and shares of Class B common stock for newly-issued shares of our Class A common stock on a one-for-one basis.

After giving effect to the Reorganization Transactions, assuming that the Pre-IPO LLC Members redeem or exchange all of their LLC Units for newly-issued shares of our Class A common stock on a one-for-one basis, and after giving effect to the sale of                shares of Class A common stock in this offering at the assumed initial public offering price of $                per share (the midpoint of the estimated initial price range on the cover page of this prospectus) and the use of the net proceeds from this offering, our pro forma net tangible book value would have been approximately $                , or $                per share, representing an immediate increase in net tangible book value of $                per share to existing equityholders and an immediate dilution in net tangible book value of $                per share to new investors.

The following table illustrates the per share dilution:

 

Assumed initial public offering price per share

   $                

Pro forma net tangible book value per share as of March 31, 2021(1)

  
  

 

 

 

Increase in pro forma net tangible book value per share attributable to new investors

  

Pro forma net tangible book value per share after this offering

  
  

 

 

 

Dilution in pro forma net tangible book value per share to new investors

   $    
  

 

 

 

 

(1)

The computation of pro forma net tangible book value per share as of March 31, 2021 is set forth below:

 

(in thousands, except per share data)       

Book value of tangible assets(a)

   $                

Less: total liabilities(a)

  
  

 

 

 

Pro forma net tangible book value(a)

  

Shares of Class A common stock outstanding(a)

  
  

 

 

 

Pro forma net tangible book value per share

   $    
  

 

 

 

 

(a)

Gives pro forma effect to the Reorganization Transactions (other than the issuance of Class A common stock to the public pursuant to the offering) and the Assumed Redemption.

 

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Dilution is determined by subtracting pro forma net tangible book value per share after this offering from the initial public offering price per share of Class A common stock.

A $1.00 increase (decrease) in the assumed initial public offering price of $                per share would increase (decrease) the dilution per share to new investors by $                , in each case assuming the number of shares offered, as set forth on the cover page of this prospectus, remains the same.

To the extent the underwriters’ option to purchase additional shares of Class A common stock is exercised, there will be further dilution to new investors.

The following table illustrates, as of March 31, 2021, after giving effect to the Assumed Redemption and the sale by us of shares of our Class A common stock in this offering at the initial public offering price of $                per share (the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus), the difference between the existing Pre-IPO LLC Members, and the investors purchasing shares of our Class A common stock in this offering with respect to the number of shares of our common stock purchased from us, the total consideration paid or to be paid to us, and the average price per share paid or to be paid to us, before deducting underwriting discounts and commissions and the estimated offering expenses payable by us:

 

     Shares purchased     Total consideration     Average price  
     Number      Percent     Amount      Percent     Per share  

Pre-IPO LLC Members

                                $                             $                

Investors purchasing shares of our Class A common stock in this offering

            
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total

        100   $          100   $    
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

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 additional capital is raised through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to holders of our Class A common stock.

 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

The following tables set forth selected historical consolidated financial data of Weber-Stephen Products LLC as of and for the periods presented. Weber-Stephen Products LLC is the predecessor of Weber Inc. for financial reporting purposes. Weber Inc. was formed as a Delaware corporation on April 1, 2021 and has not, to date, conducted any activities other than those incident to its formation, the Reorganization Transactions and the preparation of this prospectus and the registration statement of which this prospectus forms a part. As such, the selected historical consolidated financial data of Weber Inc. have not been presented.

The selected consolidated statement of income data for the fiscal years ended September 30, 2018, 2019 and 2020 and selected consolidated balance sheet data as of September 30, 2019 and 2020 have been derived from Weber-Stephen Products LLC’s audited consolidated financial statements included elsewhere in this prospectus. The selected condensed consolidated statement of income for the six months ended March 31, 2020 and 2021 (unaudited) and selected condensed consolidated balance sheet data as of March 31, 2021 (unaudited) have been derived from Weber-Stephen Products LLC’s unaudited condensed consolidated financial statements included elsewhere in this prospectus which, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the unaudited interim periods.

The selected historical consolidated financial data presented below do not purport to be indicative of the results that can be expected for any future period and should be read together with “Capitalization,”, “Summary Historical and Unaudited Pro Forma Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes thereto included elsewhere in this prospectus.

 

     Weber-Stephen Products LLC  
     Fiscal Year Ended September 30,     Six Months Ended
March 31,
 
     2018     2019     2020     2020     2021  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
(Dollars in thousands, except share and per share
information)
         (Unaudited)  

Consolidated Statement of Income Data

          

Net sales

   $ 1,340,032     $ 1,296,210     $ 1,525,260     $ 596,376     $ 963,309  

Cost of goods sold(1)(2)

     759,786       793,536       915,586       358,417       542,782  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     580,246       502,674       609,674       237,959       420,527  

Operating expenses:

          

Selling, general and administrative(1)(2)

     397,444       369,651       444,975       174,718       297,986  

Amortization of intangible assets

     11,786       13,586       13,235       6,855       6,864  

Impairment of assets

           12,568                    

Gain on disposal of assets held for sale

                             (5,185
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     171,016       106,869       151,464       56,386       120,862  

Foreign currency loss (gain)

     7,118       (1,837     5,081       6,033       (14

Interest income

     (1,594     (1,153     (1,270     (701     (425

Interest expense

     34,609       45,170       40,357       21,111       32,174  

Loss from early extinguishment of debt

                             5,448  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before taxes

     130,883       64,689       107,296       29,943       83,679  

Income taxes

     17,588       13,544       13,812       3,558       15,389  

Loss (gain) from investments in unconsolidated affiliates

           1,025       4,604       2,778       (5,505
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     113,295       50,120       88,880       23,607       73,795  

Earnings allocated to participating securities

     (738     (320     (473     (234     (610
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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     Weber-Stephen Products LLC  
     Fiscal Year Ended September 30,     Six Months Ended
March 31,
 
     2018     2019     2020     2020     2021  
(Dollars in thousands, except share and per share
information)
         (Unaudited)  

Net income attributable to common members

   $ 112,557     $ 49,800     $ 88,407     $ 23,373     $ 73,185  

Net income per common unit

          

Basic

   $ 193.53     $ 87.95     $ 160.23     $ 42.36     $ 132.62  

Diluted

   $ 193.53     $ 87.95     $ 160.23     $ 42.36     $ 132.62  

Weighted average common units outstanding

          

Basic

     581,616       566,223       551,763       551,753       551,836  

Diluted

     581,616       566,223       551,763       551,753       551,836  

Pro forma net income (loss) per share attributable to common stockholders(3)

          

Basic

          

Diluted

          

Weighted-average shares used in computing pro forma net income (loss) per share attributable to common stockholders(3)

          

Basic

          

Diluted

          

Consolidated Statement of Cash Flows Data:

          

Net cash provided by (used in) operating activities

   $ 110,648     $ 126,468     $ 305,178     $ (212,035   $ (214,649

Net cash (used in) provided by investing activities

   $ (33,079   $ (67,257   $ (22,207   $ (18,226   $ (105,565

Net cash (used in) provided by financing activities

   $ (204,179   $ (50,728   $ (213,240   $ 252,830     $ 571,266  

Additions to property, equipment and leasehold improvements

   $ (34,904   $ (25,507   $ (29,414   $ (18,264   $ (17,354

 

     Weber-Stephen Products LLC  
     As of September 30,     As of
March 31,
 
     2019     2020     2021  
(Dollars in thousands)          (Unaudited)  

Consolidated Balance Sheet Data:

      

Cash and cash equivalents

   $ 44,665     $ 123,792     $ 379,939  

Working (deficit) capital(5)

   $ (84,879   $ 45,023     $ 660,865  

Total assets

   $ 961,611     $ 1,139,435     $ 2,026,197  

Long-term debt, less current portion

   $ 594,035     $ 575,659     $ 1,210,560  

Total liabilities

   $ 1,083,371     $ 1,182,983     $ 1,999,483  

Total members’ (deficit) equity

   $ (121,760   $ (43,548   $ 26,714  

 

(1)

Amounts include unit-based compensation as follows:

 

     Fiscal Year Ended
September 30,
     Six Months
Ended March 31,
 
     2018     2019     2020      2020      2021  
(Dollars in thousands)                       (Unaudited)  

Cost of goods sold

   $ (138   $     $ 663      $ 65      $ 279  

Selling, general and administrative

     (952     (1,446     3,851        827        32,200  
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Total unit-based compensation

   $ (1,090   $ (1,446   $ 4,514      $ 892      $ 32,479  
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

 

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(2)

Amounts include depreciation and amortization expense as follows:

 

     Fiscal Year Ended September 30,      Six Months Ended
March 31,
 
     2018      2019      2020      2020      2021  
(Dollars in thousands)           (Unaudited)  

Cost of goods sold

   $ 22,066      $ 17,106      $ 15,697      $ 8,024      $ 6,457  

Selling, general and administrative

     14,765        15,625        13,415        6,593        7,007  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total depreciation and amortization expense

   $ 36,831      $ 32,731      $ 29,112      $ 14,617      $ 13,464  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(3)

We define working (deficit) capital as current assets less current liabilities.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with the section titled “Selected Consolidated Financial and Other Data” and our consolidated financial statements and the related notes appearing elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should read the sections titled “Risk Factors” and “Special Note Regarding Forward-Looking Statements” for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Our fiscal year end is September 30, and our fiscal quarters end on December 31, March 31, June 30, and September 30. Our fiscal years ended September 30, 2018, 2019, 2020, and 2021 are referred to herein as Fiscal Year 2018, Fiscal Year 2019, Fiscal Year 2020, and the fiscal year ending September 30, 2021 (“Fiscal Year 2021”), respectively.

Our Company

We are the leading outdoor cooking company with the strongest and most trusted brand in the global outdoor cooking market. Our founder George Stephen, Sr., established the outdoor cooking category when he invented the original charcoal grill nearly 70 years ago. In the decades since, we have built a loyal and global following of both grilling enthusiasts and barbeque professionals in backyards all around the world. We have continuously disrupted and led the outdoor cooking category, through a comprehensive and expanding product portfolio including traditional charcoal grills, gas grills, smokers, pellet and electric grills, and recently our cutting-edge Weber Connect technology-enabled grills. We believe we offer the most complete outdoor cooking portfolio globally, with our full range of premium products sold in 78 countries in Fiscal Year 2020.

We believe Weber is the only outdoor cooking brand with global scale and a vertically integrated manufacturing platform. Our track record of premium product innovation and the strength of our brand has led to a market-leading share of 23% in the U.S. and 24% globally in 2020, according to Frost & Sullivan. We are leaders in the largest and most attractive markets in outdoor cooking, including the U.S., Germany, Australia, Canada and France. Beyond these markets, we estimate that we have either the number one or number two brand position in each of the key geographies we serve.

We have spent decades building brand affinity and awareness by teaching people how to grill the “Weber Way.” By consistently delivering high-performing, differentiated products and best-in-class customer service, we have built a global community of passionate brand loyalists who value our innovation, uncompromising quality and performance. Over the years, families have passed down their affinity for Weber from one generation to the next, forging a deep emotional connection between consumers and our brand. We continue to deepen our relationship with our consumers by bringing innovation to our grill and accessories portfolio, introducing breakthrough connected products, expanding into new categories, and providing engaging brand experiences.

Key Factors Affecting Our Results of Operations

We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section of this prospectus titled “Risk Factors.”

 

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Economic Conditions

Demand for our products is significantly affected by a number of economic factors impacting our customers and consumers, such as the availability of credit, consumer confidence and spending, demographic trends, employment levels, and other macroeconomic factors (e.g., lockdowns, government mandates, etc.) that may influence the extent to which consumers invest in household products such as grills, and associated accessories, consumables, and services.

Seasonality/Weather

Although we generally have demand for our products throughout the year, our sales have historically experienced some seasonality. We have typically experienced our highest level of sales of our products in the second and third fiscal quarters as retailers across North America and Europe changeover their floor sets, build inventory and fulfill consumer demand for outdoor cooking products. Sales are typically lower during our first and fourth fiscal quarters, with the exception of our Australia/New Zealand business which is counter seasonal to the balance of our business. We have a long track record of investing in our business throughout the year, including in operating expenses, working capital, and other growth initiatives. We typically borrow under our short-term revolving facility in the first and second fiscal quarters to fund working capital for building up inventory in anticipation of the higher demand we experience in the second and third fiscal quarters. While these investments drive performance during the primary selling season in our second and third fiscal quarters, they generally have a negative impact on cash flow and net income during our first and fourth fiscal quarters. Unfavorable weather during our higher sales season can also have a material adverse impact on our results, and can cause shifts in sales across fiscal quarters. A few examples are colder, wetter weather patterns during the key second and third fiscal quarters in North America and Europe, or drought conditions leading to wildfires similar to what Australia experienced in early Fiscal Year 2020.

Business Acquisitions

On January 12, 2021, we acquired all of the outstanding stock of June Life, Inc. (“June”), a smart appliance and technology company. The acquisition aligns with the Company’s strategy of revolutionizing the outdoor cooking experience through connected products, services and experiences that make grilling the perfect meal simple with our smartphone-enabled step-by-step cooking experience. Weber Connect, powered by June OS, is our award-winning smart cooking software solution developed with June. The acquisition was accounted for as a business combination, and June was acquired for aggregate consideration of $142.2 million, including $108.3 million of cash. The results of operations for June have been included in the condensed consolidated statement of income since the acquisition date, which were not material. The assets acquired and liabilities assumed in connection with this acquisition were included in our condensed consolidated balance sheet as of March 31, 2021, which have been measured at fair value as of the acquisition date.

On April 1, 2021, we acquired substantially all of the operations of R. McDonald Co. Pty. Ltd., a sales and marketing company in Australia and New Zealand, for approximately $29.3 million in cash and $14.2 million in equity.

We remain open to synergistic acquisitions that enhance our product line, geographic reach, market share and operational capabilities.

Impact of COVID-19

Since the onset of the COVID-19 pandemic, we have focused on protecting our employees’ health and safety, meeting our customers’ needs as they navigate an uncertain financial and operating

 

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environment, working closely with our suppliers to protect our ongoing business operations and rapidly adjusting our short-, medium- and long-term operational plans to proactively and effectively respond to the current and potential future public health crises. While the COVID-19 pandemic presents serious concerns for our business and operations, our employees and their families, our customers and our suppliers, we believe that we are adapting well to the wide-ranging changes that the global economy is currently undergoing. We remain confident in our business continuity strategy, our ability to produce and sell our products safely and in compliance with applicable laws and governmental orders and mandates, our robust and flexible supply chains and our financial flexibility even in the event of a potentially extended economic downturn. This discussion and analysis includes periods prior to the outbreak of the COVID-19 pandemic. For further discussion of the steps we have taken to respond to and mitigate the effects of the COVID-19 pandemic, see “Risk Factors.”

We are fully operational as we abide by local COVID-19 safety regulations across the world. To achieve this, we have many employees working remotely and have adopted significant protective measures for our employees on site, including staggered shifts, social distancing and hygiene best practices recommended by the United States Centers for Disease Control and Prevention (the “CDC”) and local public health officials. In addition, we have taken additional steps to monitor and strengthen our supply chain to maintain an uninterrupted supply of our products.

Although we have implemented measures to mitigate the impact of the COVID-19 pandemic on our business, these measures may not be fully effective. We cannot predict the degree to, or the period over, which we will be affected by the pandemic and resulting governmental and other measures. The economic effects of the COVID-19 pandemic could continue to affect demand for our products in the foreseeable future.

The COVID-19 environment has encouraged consumers to cook at home and enjoy the benefits of outdoor grilling, creating increased demand for our grills and accessories, and we expect to continue to benefit from these trends even after the pandemic recedes. As the COVID-19 pandemic continues, it may also have the effect of heightening many of the risks described in “Risk Factors” in this prospectus. See “Risk Factors” for a further discussion of the adverse impacts of the COVID-19 pandemic on our business.

Impacts of the Initial Public Offering

Impact of Debt Repayment

Net proceeds after expenses to us of $                in connection with the sale of Class A common stock in this offering, based on an assumed initial public offering price of $                 per share, which is the midpoint of the price range set forth on the cover of this prospectus, together with cash on hand, are used to repay a portion of outstanding indebtedness, as described in “Use of Proceeds.” We expect our interest expense to decrease as a result of this offering and our anticipated Use of Proceeds therefrom to repay $                of the outstanding borrowings under our Secured Credit Facility (as defined below).

Incremental Public Company Expenses

During the period leading up to, and following our initial public offering, we will incur significant expenses that we did not incur as a private company. Those costs include director and officer liability insurance expenses, increased stock compensation expense, as well as costs associated with third-party and internal resources related to accounting, auditing, Sarbanes-Oxley Act compliance, legal,

 

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and investor and public relations activities. These costs will generally be expensed as selling, general and administrative expenses in the consolidated statements of income.

Organizational Transactions

Weber Inc. was incorporated in April 2021 and formed for the purpose of this offering and has engaged to date only in activities in contemplation of this offering. Weber Inc. will be a holding company and its sole material asset will be a controlling ownership interest in Weber HoldCo LLC. For more information regarding our reorganization and holding company structure, see “Organizational Structure–Holding Company Structure and the Tax Receivable Agreement.” Upon completion of this offering, all of our business will be conducted through Weber HoldCo LLC and its consolidated subsidiaries, and the financial results of Weber HoldCo LLC and its consolidated subsidiaries will be included in the consolidated financial statements of Weber Inc.

Weber HoldCo LLC will be treated as a pass-through entity for U.S. federal and state income tax purposes and accordingly has not been subject to U.S. federal income tax. Certain wholly owned subsidiaries of Weber HoldCo LLC are taxed as corporations for U.S. federal and most applicable state, local income tax and foreign tax purposes. After consummation of this offering, Weber HoldCo LLC will continue to be treated as a pass-through entity for U.S. federal and state income tax purposes and certain subsidiaries will continue to be taxed as corporations for U.S. federal and most applicable state, local income tax and foreign tax purposes. As a result of its ownership of LLC Units in Weber HoldCo LLC, Weber Inc. will become subject to U.S. federal, state and local income taxes with respect to its allocable share of any taxable income of Weber HoldCo LLC and will be taxed at the prevailing corporate tax rates. In addition to tax expenses, we also will incur expenses related to our operations, and we will be required to make payments under the Tax Receivable Agreement with the Pre-IPO LLC Members. Due to the uncertainty of various factors, we cannot estimate the likely tax benefits we will realize as a result of LLC Unit exchanges, and the resulting amounts we are likely to pay out to Pre-IPO LLC Members pursuant to the Tax Receivable Agreement; however, we estimate that such payments may be substantial. We intend to cause Weber HoldCo LLC to make distributions in an amount sufficient to allow us to pay our tax obligations and operating expenses, including distributions to fund any ordinary course payments due under the Tax Receivable Agreement. See ‘‘Organizational Structure—Holding Company Structure and the Tax Receivable Agreement.”

Components of our Operating Results

We consider a variety of financial and operating measures in assessing the performance of our business. The key U.S. GAAP measures we use are net sales, gross profit, income from operations and net income.

Net Sales

We offer a broad range of products that consist of grills, accessories, and consumables. We recognize product sales upon the transfer of products to customers at a point in time. Transfer of control passes to customers upon shipment or upon delivery depending upon the written sales terms with the customer. Sales are recorded net of related discounts, allowances and taxes to be submitted to third parties. Sales are impacted by product/geography/channel mix, pricing actions, foreign exchange fluctuations, promotions, competition, and the spending habits of our consumers. Sales growth is primarily driven by new product launches, geographic expansion, direct-to-consumer initiatives, point-of-sale (“POS”) changes, and expanding our customer base.

 

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Cost of Goods Sold

Cost of goods sold includes the cost of direct materials, labor, purchased finished products and components, inbound freight, packaging, warranty, and depreciation and amortization. Cost of goods sold is recognized primarily using the first-in first-out (“FIFO”) method of accounting for the inventory sold.

Gross Profit and Gross Margin

Gross profit is calculated by taking net sales less cost of goods sold. Gross profit is generally impacted by purchased finished product and component costs, material/commodity costs, labor economics, product pricing, product mix, and changes in foreign currencies. Gross margin is defined as gross profit as a percentage of net sales.

Operating Expenses

Selling, General and Administrative

Selling, general and administrative expenses consist primarily of research and development (“R&D”), marketing, advertising, and selling costs; non-manufacturing employee compensation and benefit costs; transportation costs of delivering our product to customers and the costs associated with a network of warehousing facilities to house inventory until the point of sale; outside services and fees; legal, insurance, accounting, audit, and other administrative expenses; cost of non-cash stock-based compensation; and general corporate infrastructure costs. We expect our selling, general and administrative expenses to increase to support our growth initiatives and as a result of operating as a public company, including additional costs to comply with the rules and regulations of the SEC and stock exchanges; for legal and auditing services; for additional insurance; for investor relations activities; and for other administrative and professional services.

Amortization of Intangible Assets

Intangible assets other than goodwill are amortized over their useful lives in accordance with Accounting Standards Codification (“ASC”) 350, Intangibles—Goodwill and Other, unless those lives are determined to be indefinite. Intangible amortization expense is primarily related to our trademarks, customer lists, in-process R&D and non-compete agreements. The weighted average amortization period ranges from less than one year to 16.6 years.

Impairment of Assets

We review our goodwill and other intangible assets not subject to amortization for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. As part of our Fiscal Year 2019 annual goodwill impairment test, we recognized a non-cash impairment loss of $12.6 million on the iGrill goodwill.

Gain on Disposal of Assets Held for Sale

During Fiscal Year 2020, we determined that one of our manufacturing sites was considered to be assets held for sale, since the asset group was being marketed for sale and all the criteria to be classified as held for sale under ASC 360, Property, Plant and Equipment, had been met. The related buildings and its content were vacated and we no longer required these assets for our future operations. The carrying value of these assets was $8.3 million as of September 30, 2020. Assets held for sale are measured at the lower of their carrying value or the fair value less cost to sell. On December 30, 2020, we disposed of this manufacturing site, for net cash proceeds of $13.5 million, which resulted in a gain of $5.2 million.

 

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Foreign Currency Loss (Gain)

The functional currencies of the Company’s foreign subsidiaries are predominantly the respective local currencies. Foreign currency loss (gain) includes gains and losses on transactions conducted in foreign currencies other than the functional currency.

Interest Income

Interest income consists of interest earned on our cash and cash equivalents, as well as interest on member notes.

Interest Expense

Interest expense consists primarily of interest on our borrowings, including our senior credit facility (“Senior Facility”) and Secured Credit Facility (term loan and revolving facility), foreign currency revolving and overdraft facility, and charges for limited standby letters of credit. Interest expense also includes the amortization of deferred financing costs associated with our credit facility, current year impacts of interest rate swap transactions, as well as interest expense resulting from financing obligations under sale-leasebacks arrangements.

Loss from Early Extinguishment of Debt

Under extinguishment accounting, the Company recorded a $5.4 million loss from early extinguishment of debt, of which $4.1 million related to the unsecured term loan of the Company’s Senior Credit Facility and $1.3 million related to unsecured revolving credit of the Senior Facility, representing a write-off of unamortized deferred financing costs.

Income Taxes

Income taxes consist primarily of state and international taxes for jurisdictions in which we conduct business. The Company has operations that are subject to income and other similar taxes in foreign countries. A valuation allowance is provided to offset deferred tax assets if, based on available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Weber’s practice is to recognize interest and penalties related to income tax matters, if assessed, in income taxes.

Non-GAAP Measures

In addition to the measures presented above and in our consolidated financial statements, we use the following non-GAAP measures to evaluate our business, measure our performance, identify trends affecting our business and assist us in making strategic decisions. Our non-GAAP measures are: adjusted income from operations, adjusted net income, EBITDA and Adjusted EBITDA.

Adjusted Income from Operations and Adjusted Net Income

Adjusted income from operations and adjusted net income is income from operations and net income adjusted for non-cash stock compensation / Management Incentive Plan (“LTIP”) and profits interest expense, business transformation costs, operational transformation costs, impairment costs, debt refinancing and IPO costs, COVID-19 costs, and gain on disposal of assets held for sale as shown below, and, in the case of adjusted net income, loss from early extinguishment of debt, net of the tax impact of such adjustments. Adjusted income from operations is also adjusted for foreign currency (loss) gain. Adjusted income from operations excludes loss from early extinguishment of debt, interest expense, net, income taxes, and loss (gain) from investments in unconsolidated affiliates. We use adjusted income from operations and adjusted net income as indicators of the productivity of our business and our ability to manage expenses, after adjusting for certain expenses that we view as not indicative of regular operations. Adjusted income from operations and adjusted net income are not calculated in the same manner by all companies, and accordingly, are not necessarily comparable to similarly entitled measures of other companies and may not be an appropriate measure for performance relative to other companies.

 

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EBITDA and Adjusted EBITDA

EBITDA is net income before interest expense, net, income taxes, and depreciation and amortization.

Adjusted EBITDA is a key metric used by management and our Board of Directors to assess our financial performance. Adjusted EBITDA is also frequently used by analysts, investors and other interested parties to evaluate companies in our industry, when considered alongside other U.S. GAAP measures. We use Adjusted EBITDA to supplement U.S. GAAP measures of performance to evaluate the effectiveness of our business strategies, to make budgeting decisions, and to compare our performance against that of other companies using similar measures.

Adjusted EBITDA is defined as net income before interest expense, net, income taxes, depreciation and amortization, adjusted for non-cash stock compensation / LTIP and profits interest expense, business transformation costs, operational transformation costs, impairment costs, debt refinancing and IPO costs, COVID-19 operational costs, loss from early extinguishment of debt, and gain on disposal of assets held for sale as shown below. Adjusted EBITDA is not calculated in the same manner by all companies, and accordingly, is not necessarily comparable to similarly entitled measures of other companies and may not be an appropriate measure for performance relative to other companies. Adjusted EBITDA should not be construed as an indicator of a company’s operating performance in isolation from, or as a substitute for, net income, cash flows from operations or cash flow data, all of which are prepared in accordance with U.S. GAAP. We have presented Adjusted EBITDA solely as supplemental disclosure because we believe it allows for a more complete analysis of results of operations. Adjusted EBITDA is not intended to represent, and should not be considered more meaningful than, or as an alternative to, measures of operating performance as determined in accordance with U.S. GAAP. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by these items.

The following table reconciles income from operations to adjusted income from operations; net income to adjusted net income; net income to EBITDA; and EBITDA to Adjusted EBITDA for the periods presented:

 

    Fiscal Years Ended September 30,     Six Months Ended
March 31,
 
    2018     2019     2020     2020     2021  
    (Dollars in thousands)  

Income from operations

  $ 171,016     $ 106,869     $ 151,464     $ 56,386     $ 120,862  

Adjustments:

         

Foreign currency (loss) gain(a)

    (7,118     1,837       (5,081     (6,033     14  

Non-cash stock compensation / LTIP and profits interest expense(b)

    (1,090     (1,446     4,514       892       32,479  

Business transformation costs(c)

    7,461       22,706       12,515       3,591       2,924  

Operational transformation costs(d)

          1,244       8,532       1,394       5,826  

Impairment costs(e)

          12,568                    

Debt refinancing and IPO costs(f)