Utz Brands, Inc (NYSE:UTZ) Q1 2024 Results Conference Call May 2, 2024 8:30 AM ET Company Participants Kevin Powers - Senior Vice President of Investor Relations Howard Friedman - CEO & Director Ajay Kataria - Executive VP, CFO & Principal Accounting Officer Cary Devore - Executive VP and Chief Operating & Transformation Officer Conference Call Participants Andrew Lazar - Barclays Nik Modi - RBC Capital Peter Galbo - Bank of America Rob Dickerson - Jefferies Rupesh Parikh - Oppenheimer Matt McGinley - Needh ...

[PART I – FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This part presents the unaudited consolidated financial statements and management's discussion and analysis for Utz Brands, Inc [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited consolidated financial statements of Utz Brands, Inc., including the balance sheets, statements of operations and comprehensive income (loss), statements of equity, and statements of cash flows, along with their accompanying notes, for the period ended March 31, 2024 [Consolidated Balance Sheets](index=4&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity as of March 31, 2024, and December 31, 2023 | Metric | As of March 31, 2024 (in thousands) | As of December 31, 2023 (in thousands) | Change (QoQ) | | :----------------------------------------- | :---------------------------------- | :----------------------------------- | :----------- | | Total Assets | $2,625,252 | $2,746,736 | -$121,484 | | Total Liabilities | $1,235,164 | $1,363,053 | -$127,889 | | Total Equity | $1,390,088 | $1,383,683 | +$6,405 | | Cash and cash equivalents | $47,004 | $52,023 | -$5,019 | | Goodwill | $870,695 | $915,295 | -$44,600 | | Intangible assets, net | $1,011,237 | $1,063,413 | -$52,176 | | Total current liabilities | $235,276 | $230,686 | +$4,590 | | Non-current portion of term debt and revolving credit facility | $736,246 | $878,511 | -$142,265 | [Consolidated Statements of Operations and Comprehensive Income (Loss)](index=5&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20INCOME%20%28LOSS%29) This section presents the company's financial performance, including net sales, gross profit, and net income (loss) for the thirteen weeks ended March 31, 2024, and April 2, 2023 | Metric | Thirteen weeks ended March 31, 2024 (in thousands) | Thirteen weeks ended April 2, 2023 (in thousands) | Change (YoY) | | :--------------------------------- | :--------------------------------------- | :-------------------------------------- | :----------- | | Net sales | $346,523 | $351,433 | -$4,910 | | Cost of goods sold | $226,950 | $246,937 | -$19,987 | | Gross profit | $119,573 | $104,496 | +$15,077 | | Income (loss) from operations | $9,655 | $(2,098) | +$11,753 | | Gain on sale of business | $44,015 | — | +$44,015 | | Net income (loss) | $2,397 | $(14,482) | +$16,879 | | Net loss attributable to controlling interest | $(3,990) | $(9,127) | +$5,137 | | Basic Loss per Class A Common stock | $(0.05) | $(0.11) | +$0.06 | [Consolidated Statements of Equity](index=6&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20EQUITY) This section details changes in the company's equity, including total stockholders' equity, net income (loss) attributable to controlling interest, share-based compensation, and cash dividends | Metric | As of March 31, 2024 (in thousands) | As of April 2, 2023 (in thousands) | | :------------------------------------ | :---------------------------------- | :--------------------------------- | | Total Stockholders' Equity | $671,051 | $692,050 | | Total Equity | $1,390,088 | $1,430,866 | | Net (loss) income attributable to controlling interest | $(3,990) | $(9,127) | | Share-based compensation | $3,913 | $4,634 | | Cash dividends declared | $(4,803) | $(56) | [Consolidated Statements of Cash Flows](index=7&type=section&id=CONSOLIDATED%20STATEMENT%20OF%20CASH%20FLOWS) This section outlines the company's cash inflows and outflows from operating, investing, and financing activities for the thirteen weeks ended March 31, 2024, and April 2, 2023 | Metric | Thirteen weeks ended March 31, 2024 (in thousands) | Thirteen weeks ended April 2, 2023 (in thousands) | Change (YoY) | | :----------------------------------------- | :--------------------------------------- | :-------------------------------------- | :----------- | | Net cash used in operating activities | $(9,065) | $(8,443) | -$622 | | Net cash provided by (used in) investing activities | $158,011 | $(14,018) | +$172,029 | | Net cash (used in) provided by financing activities | $(153,965) | $7,452 | -$161,417 | | Net decrease in cash and cash equivalents | $(5,019) | $(15,009) | +$9,990 | | Cash and cash equivalents at end of period | $47,004 | $57,921 | -$10,917 | [Notes to the Consolidated Financial Statements](index=8&type=section&id=NOTES%20TO%20THE%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides detailed explanations and additional information supporting the consolidated financial statements, covering accounting policies, divestitures, and other financial disclosures [1. Operations and Summary of Significant Accounting Policies](index=8&type=section&id=1.OPERATIONS%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This section outlines the basis of presentation for the financial statements, details revenue recognition policies, and discusses recently issued accounting standards, including updates on income tax and segment reporting disclosures - The consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial statements and SEC rules, not including all information required for annual statements[27](index=27&type=chunk) - The Consolidated Statement of Cash Flows for the thirteen weeks ended April 2, 2023, was corrected for comparability regarding borrowings and repayments of lines of credit[28](index=28&type=chunk) - Revenue is primarily from salty snack sales, recognized upon transfer of control to customers, net of variable consideration like discounts and promotions[29](index=29&type=chunk)[30](index=30&type=chunk) - The company is evaluating the impact of ASU 2023-09 (Income Taxes) and ASU 2023-07 (Segment Reporting), effective for fiscal years beginning after December 15, 2024, and December 15, 2023, respectively[32](index=32&type=chunk)[33](index=33&type=chunk) [2. Divestiture](index=9&type=section&id=2.%20DIVESTITURE) On February 5, 2024, the company sold its Good Health and R.W. Garcia brands, manufacturing facilities, and related assets to Our Home™ for $167.5 million, recognizing a $44.0 million gain on the sale - Sold Good Health and R.W. Garcia brands, Lincolnton, NC, and Lititz, PA manufacturing facilities, and related assets to Our Home™ for **$167.5 million** on February 5, 2024[34](index=34&type=chunk) - Recognized a gain on the sale of **$44.0 million**[35](index=35&type=chunk) Net Assets Sold | Net Assets Sold | Amount (in thousands) | | :--------------------------------- | :-------------------- | | Property, plant, and equipment, net | $27,483 | | Goodwill | $44,600 | | Intangible assets, net | $44,327 | | Net working capital adjustments | $7,075 | | **Total Net Assets Sold** | **$123,485** | - Entered into a 12-month transition services agreement and reciprocal co-manufacturing agreements with Our Home™[36](index=36&type=chunk) [3. Inventories](index=9&type=section&id=3.INVENTORIES) This section provides a breakdown of inventory components, showing a slight decrease in total inventories, and notes the sale of $6.3 million in inventory as part of the Good Health and R.W. Garcia Sale Inventory Components | (in thousands) | As of March 31, 2024 | As of December 31, 2023 | | :----------------- | :--------------------- | :----------------------- | | Finished goods | $68,271 | $65,673 | | Raw materials | $27,328 | $29,757 | | Maintenance parts | $8,987 | $9,236 | | **Total inventories** | **$104,586** | **$104,666** | - Sold **$6.3 million** of inventory in connection with the Good Health and R.W. Garcia Sale in February 2024[37](index=37&type=chunk) [4. Property, Plant and Equipment, Net](index=10&type=section&id=4.PROPERTY%2C%20PLANT%20AND%20EQUIPMENT%2C%20NET) This section details the composition of property, plant, and equipment, net, which decreased due to the sale of manufacturing facilities and related assets, and notes a reduction in depreciation expense Property, Plant and Equipment, Net | (in thousands) | As of March 31, 2024 | As of December 31, 2023 | | :------------------------- | :--------------------- | :----------------------- | | Land | $26,891 | $28,561 | | Buildings | $117,134 | $123,603 | | Machinery and equipment | $221,848 | $248,886 | | Less: accumulated depreciation | $(115,150) | $(126,752) | | **Property, plant and equipment, net** | **$295,836** | **$318,881** | - Depreciation expense was **$8.7 million** for the thirteen weeks ended March 31, 2024, down from **$10.4 million** in the prior year period[38](index=38&type=chunk) - Sold Lincolnton, NC, and Lititz, PA manufacturing facilities (book value **$27.5 million**) and the Birmingham, AL manufacturing facility (proceeds **$6.0 million**) during Q1 2024[39](index=39&type=chunk) [5. Goodwill and Intangible Assets, Net](index=10&type=section&id=5.GOODWILL%20AND%20INTANGIBLE%20ASSETS%2C%20NET) This section presents the changes in goodwill and intangible assets, net, primarily reflecting a decrease due to the divestiture of the Good Health and R.W. Garcia brands, including related customer relationships and trademarks - Goodwill decreased by **$44.6 million** due to the Good Health and R.W. Garcia Sale, from **$915.3 million** (Dec 31, 2023) to **$870.7 million** (March 31, 2024)[40](index=40&type=chunk) Intangible Assets, Net | (in thousands) | As of March 31, 2024 | As of December 31, 2023 | | :--------------------------------- | :--------------------- | :----------------------- | | Distributor/customer relationships | $647,712 | $677,930 | | Trademarks | $59,920 | $63,850 | | Trade names (not subject to amortization) | $419,513 | $434,513 | | **Intangible assets, net** | **$1,011,237** | **$1,063,413** | - Sold **$26.0 million** in customer relationships and **$18.3 million** in trademarks related to the Good Health and R.W. Garcia Sale[41](index=41&type=chunk) - Amortization expense for distributor/customer relationships, technology, and trade names was **$9.2 million** for Q1 2024, down from **$9.4 million** for Q1 2023[42](index=42&type=chunk) [6. Notes Receivable](index=11&type=section&id=6.%20NOTES%20RECEIVABLE) This section details the outstanding notes receivable from Independent Operators (IOs) for the sale of product distribution routes, which are collateralized by the routes themselves - Notes receivable from IOs totaled **$16.4 million** as of March 31, 2024, down from **$17.6 million** as of December 31, 2023[43](index=43&type=chunk) - These notes bear interest at rates ranging from **4.50% to 10.31%** with terms generally from two to ten years and are collateralized by the routes[43](index=43&type=chunk) [7. Accrued Expenses and Other](index=11&type=section&id=7.%20ACCRUED%20EXPENSES%20AND%20OTHER) This section provides a detailed breakdown of current and non-current accrued expenses and other liabilities, highlighting increases in accrued federal income tax payable and deferred transition services fees Current Accrued Expenses and Other | (in thousands) | As of March 31, 2024 | As of December 31, 2023 | | :------------------------------------ | :--------------------- | :----------------------- | | Accrued compensation and benefits | $14,278 | $21,466 | | Accrued Federal income tax payable | $18,534 | — | | Deferred transition services and other fees | $12,727 | — | | **Total current accrued expenses and other** | **$91,278** | **$77,590** | Non-Current Accrued Expenses and Other | (in thousands) | As of March 31, 2024 | As of December 31, 2023 | | :------------------------------------ | :--------------------- | :----------------------- | | Operating right of use liability | $42,745 | $43,928 | | Tax Receivable Agreement liability | $24,198 | $24,297 | | **Total non-current accrued expenses and other** | **$73,691** | **$76,720** | [8. Term Debt, Revolving Credit Facility and Other Notes Payable](index=12&type=section&id=8.%20TERM%20DEBT%2C%20REVOLVING%20CREDIT%20FACILITY%20AND%20OTHER%20NOTES%20PAYABLE) This section outlines the company's debt structure, including term loans, equipment loans, and the ABL facility, detailing significant debt repayments made using proceeds from the recent divestiture, which reduced overall long-term debt Debt Breakdown | Debt (in thousands) | As of March 31, 2024 | As of December 31, 2023 | | :-------------------------- | :------------------- | :-------------------- | | Term Loan B | $630,335 | $771,335 | | Real Estate Term Loan | $70,891 | $80,184 | | Equipment loans | $62,435 | $56,482 | | ABL facility | $248 | $368 | | **Total long-term debt (net of current portion)** | **$736,246** | **$878,511** | - Made a **$141.0 million** payment on Term Loan B and an **$8.5 million** payment on Real Estate Term Loan during Q1 2024, utilizing proceeds from the Good Health and R.W. Garcia Sale[47](index=47&type=chunk) Interest Expense | (in thousands) | Thirteen weeks ended March 31, 2024 | Thirteen weeks ended April 2, 2023 | | :--------------- | :---------------------------------- | :--------------------------------- | | Interest expense | $13,831 | $14,378 | [9. Derivative Financial Instruments, Purchase Commitments, Warrants and Fair Value](index=13&type=section&id=9.%20DERIVATIVE%20FINANCIAL%20INSTRUMENTS%2C%20PURCHASE%20COMMITMENTS%2C%20WARRANTS%20AND%20FAIR%20VALUE) This section discusses the company's use of interest rate swaps to manage exposure, the increase in warrant liabilities due to remeasurement, and outstanding purchase commitments, along with the fair value measurements of its financial assets and liabilities - Uses interest rate swaps to manage interest rate exposure on Term Loan B and Real Estate Term Loan. De-designated a hedge on Real Estate Term Loan effective February 1, 2024, reclassifying **$0.3 million** to earnings[48](index=48&type=chunk)[49](index=49&type=chunk) - Fair value of warrant liabilities increased to **$55.1 million** as of March 31, 2024, from **$43.3 million** as of December 31, 2023, due to an **$11.8 million** loss on remeasurement[51](index=51&type=chunk) - Purchase commitments for key ingredients totaled **$97.1 million** as of March 31, 2024 (up from **$66.7 million** at Dec 31, 2023), with **$0.8 million** in gains recorded for Q1 2024 (vs. **$(2.7) million** losses in Q1 2023)[52](index=52&type=chunk) Fair Value Measurements | (in thousands) | As of March 31, 2024 | As of December 31, 2023 | | :---------------------- | :------------------- | :-------------------- | | **Assets:** | | | | Cash and cash equivalents | $47,004 | $52,023 | | Commodity contracts | $563 | $211 | | Interest rate swaps | $36,451 | $33,332 | | **Liabilities:** | | | | Commodity contracts | $1,269 | $2,094 | | Private placement warrants | $55,080 | $43,272 | | Debt | $756,897 | $899,597 | [10. Contingencies](index=14&type=section&id=10.%20CONTINGENCIES) This section addresses ongoing litigation matters, which management deems immaterial, and details the company's partial guarantees on loans made to Independent Operators (IOs) for route purchases, noting that these loans are collateralized - Management believes current litigation is not likely to be material to the company's financial condition, results of operations, or cash flows[55](index=55&type=chunk) - The company partially guarantees loans made to IOs by Bank of America (**$56.3 million** outstanding at March 31, 2024) and two other banks (**$2.5 million** outstanding)[56](index=56&type=chunk)[57](index=57&type=chunk) - The maximum amount of future payments under these guarantees equates to **25%** of the outstanding loan balance, and all IO loans are collateralized by the routes[56](index=56&type=chunk)[58](index=58&type=chunk) [11. Supplementary Cash Flow Information](index=14&type=section&id=11.%20SUPPLEMENTARY%20CASH%20FLOW%20INFORMATION) This section provides additional details on cash payments for interest and income taxes, and finance lease additions for the thirteen weeks ended March 31, 2024, compared to the prior year Supplementary Cash Flow Data | (in thousands) | Thirteen weeks ended March 31, 2024 | Thirteen weeks ended April 2, 2023 | | :--------------- | :---------------------------------- | :--------------------------------- | | Cash paid for interest | $24,424 | $14,408 | | Payments for income taxes | $15 | $6 | | Finance lease additions | $1,763 | $308 | [12. Income Taxes](index=15&type=section&id=12.%20INCOME%20TAXES) This section explains the company's income tax structure, the significant increase in income tax expense for Q1 2024, and the factors affecting its effective tax rate, including the impact of the divestiture and valuation allowances on deferred tax assets - The company recorded income tax expense of **$26.5 million** for Q1 2024, compared to a benefit of **$2.6 million** for Q1 2023[61](index=61&type=chunk) - The effective tax rate was **91.7%** for Q1 2024 (vs. **15.3%** for Q1 2023), primarily impacted by a **$26.1 million** discrete tax expense from the Good Health and R.W. Garcia Sale and **$0.5 million** from state tax rate changes[61](index=61&type=chunk) - A valuation allowance has been recorded against certain Deferred Tax Assets (DTAs) due to uncertainty regarding future realization, considering a twelve-quarter cumulative loss[62](index=62&type=chunk) [Tax Receivable Agreement Liability](index=16&type=section&id=Tax%20receivable%20agreement%20liability) This subsection details the company's obligation under a Tax Receivable Agreement (TRA) to pay 85% of realized tax benefits, noting the current TRA liability - The company is obligated under a Tax Receivable Agreement (TRA) to pay **85%** of tax benefits realized from increases in the tax basis of UBH net assets and tax amortization deductions[66](index=66&type=chunk) - The TRA liability was **$24.2 million** as of March 31, 2024, slightly down from **$24.3 million** as of December 31, 2023[67](index=67&type=chunk) [13. Loss Per Share](index=17&type=section&id=13.%20LOSS%20PER%20SHARE) This section reconciles the numerators and denominators used in computing basic and diluted loss per share, noting an improvement in net loss attributable to common stockholders and the exclusion of anti-dilutive securities from diluted EPS calculations Loss Per Share Data | (in thousands, except share data) | Thirteen weeks ended March 31, 2024 | Thirteen weeks ended April 2, 2023 | | :-------------------------------- | :---------------------------------- | :--------------------------------- | | Net loss attributable to common stockholders | $(3,990) | $(9,127) | | Basic loss per share | $(0.05) | $(0.11) | | Diluted loss per share | $(0.05) | $(0.11) | - Anti-dilutive securities, including warrants (**2.5 million**), RSUs (**417 thousand**), PSUs (**264 thousand**), and stock options (**34 thousand**), were excluded from diluted earnings per share calculation for Q1 2024[69](index=69&type=chunk) [14. Subsequent Events](index=18&type=section&id=14.%20SUBSEQUENT%20EVENTS) This section reports on significant events that occurred after the reporting period, including the sale of two manufacturing facilities and the refinancing of the Term Loan B to reduce interest rates - In April 2024, the company sold its Berlin, PA and Fitchburg, MA manufacturing facilities and certain related assets for **$18.5 million**[70](index=70&type=chunk) - On April 17, 2024, the company amended its Term Loan B to refinance **$630.0 million** outstanding term loans, reducing the interest rate from **SOFR + 3.00% to SOFR + 2.75%**[71](index=71&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Utz Brands, Inc.'s financial condition and results of operations for the thirteen weeks ended March 31, 2024, discussing key developments, market trends, and the impact of recent strategic actions like divestitures and IO conversions [Overview](index=19&type=section&id=Overview) This overview describes Utz Brands, Inc. as a leading U.S. salty snack manufacturer with a century of heritage, a diverse portfolio of iconic brands, and a national distribution network, holding the second-largest market position in its core geographies - Utz Brands, Inc. is a leading U.S. manufacturer of branded salty snacks, founded in 1921, with over **100 years** of brand awareness[74](index=74&type=chunk) - The company's portfolio includes iconic brands like Utz®, ON THE BORDER®, Zapp's®, Golden Flake®, Boulder Canyon®, Hawaiian® Brand, and TORTIYAHS!®[74](index=74&type=chunk) - As of March 31, 2024, the company operates **11 manufacturing facilities** and distributes nationally through direct shipments, distributors, and approximately **2,300 direct-store delivery (DSD) routes**[74](index=74&type=chunk) [Key Developments and Trends](index=19&type=section&id=Key%20Developments%20and%20Trends) This section discusses the market dynamics, competitive landscape, operating cost management strategies, and the impact of financing costs and interest rate changes on the company's revenue and profitability objectives - The company participates in the growing **$38 billion** U.S. salty snacks category, which saw U.S. retail sales increase by **1.4%** year-over-year for the thirteen weeks ended March 31, 2024[76](index=76&type=chunk) - Snacking occasions are on the rise, with **54%** of consumers eating snacks for excitement and **49%** snacking three or more times per day[76](index=76&type=chunk) - Operating costs are managed through annual cost saving and productivity initiatives, sourcing and hedging programs, pricing actions, refinancing, and tax optimization[78](index=78&type=chunk) - Variable rate indebtedness was **$701.2 million** as of March 31, 2024 (down from **$851.5 million** at Dec 31, 2023), with **$547.0 million** covered by interest rate hedges. The weighted average interest rate for Q1 2024 was **6.6%**, up from **5.6%** in Q1 2023[79](index=79&type=chunk) [Recent Developments and Significant Items Affecting Comparability](index=20&type=section&id=Recent%20Developments%20and%20Significant%20Items%20Affecting%20Comparability) This section highlights the impact of the recent divestiture of certain brands and facilities, ongoing commodity cost trends, and the near-completion of the Independent Operator (IO) conversion strategy on the company's financial comparability - The sale of Good Health and R.W. Garcia brands and manufacturing facilities for **$167.5 million** on February 5, 2024, is a significant item affecting comparability[80](index=80&type=chunk) - Commodity costs, after rising in fiscal year 2022, stabilized in fiscal year 2023 and early 2024, but rising fuel, freight, and labor costs continue to impact profitability[81](index=81&type=chunk) - The multi-year strategy to convert company-owned route sales professional (RSP) routes to the Independent Operator (IO) model is substantially complete, leading to reduced selling, distribution, and administrative costs but increased IO discounts[83](index=83&type=chunk) [Results of Operations](index=21&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the company's financial performance for the thirteen weeks ended March 31, 2024, compared to the prior year, explaining the drivers behind changes in net sales, gross profit, and various expense categories [Overview (Results of Operations)](index=21&type=section&id=Overview%20%28Results%20of%20Operations%29) This overview presents a summary table of key financial metrics for the thirteen weeks ended March 31, 2024, and April 2, 2023 Key Financial Metrics | Metric | Thirteen weeks ended March 31, 2024 (in thousands) | Thirteen weeks ended April 2, 2023 (in thousands) | | :--------------------------------- | :--------------------------------------- | :-------------------------------------- | | Net sales | $346,523 | $351,433 | | Gross profit | $119,573 | $104,496 | | Selling, distribution, and administrative expenses | $109,448 | $106,086 | | Income (loss) from operations | $9,655 | $(2,098) | | Net income (loss) | $2,397 | $(14,482) | [Thirteen weeks ended March 31, 2024 versus thirteen weeks ended April 2, 2023](index=22&type=section&id=Thirteen%20weeks%20ended%20March%2031%2C%202024%20versus%20thirteen%20weeks%20ended%20April%202%2C%202023) This subsection provides a comparative analysis of financial performance between the current and prior year periods, detailing changes in sales, costs, and expenses [Net sales](index=22&type=section&id=Net%20sales) This section analyzes the changes in net sales, attributing shifts to divestitures, IO conversions, volume/mix, and pricing for the current period compared to the prior year - Net sales decreased by **$4.9 million (1.4%)** to **$346.5 million** for Q1 2024, primarily due to the Good Health and R.W. Garcia Sale (**2.5%** decrease) and IO conversions (**0.4%** decrease)[86](index=86&type=chunk) - The decrease was partially offset by favorable volume/mix (**1.1%** increase) and pricing (**0.4%** increase)[86](index=86&type=chunk) - Power brand sales increased by approximately **3.9%** (**83%** of net sales), while Foundation brand sales decreased by approximately **8.4%** (**17%** of net sales)[87](index=87&type=chunk) [Cost of goods sold and Gross profit](index=22&type=section&id=Cost%20of%20goods%20sold%20and%20Gross%20profit) This section examines the changes in cost of goods sold and gross profit, highlighting the impact of productivity, sales mix, pricing, and cost inflation - Gross profit increased to **$119.6 million** for Q1 2024 (from **$104.5 million** in Q1 2023), with gross profit margin improving to **34.5%** (from **29.7%**)[89](index=89&type=chunk) - The increase in gross profit and margin was primarily driven by productivity, favorable sales mix, and pricing, partially offset by cost inflation and supply chain investments[89](index=89&type=chunk) - IO conversions contributed to a **$1.5 million** decline in gross profit[89](index=89&type=chunk) [Selling, distribution, and administrative expense](index=22&type=section&id=Selling%2C%20distribution%2C%20and%20administrative%20expense) This section details the changes in selling, distribution, and administrative expenses, noting the influence of marketing spend, distribution costs, and IO conversions - Total selling, distribution, and administrative expenses increased by **$3.4 million (3.2%)** to **$109.4 million** for Q1 2024[90](index=90&type=chunk) - The increase was primarily due to increased marketing spend, higher distribution costs, and investments in capabilities, partially offset by reduced selling costs from the shift to IOs and productivity benefits[90](index=90&type=chunk) [Loss on sale of assets](index=22&type=section&id=Loss%20on%20sale%20of%20assets) This section reports on the consistency of loss on sale of assets for the current and prior year periods - Loss on sale of assets remained consistent at **$0.5 million** for both the thirteen weeks ended March 31, 2024, and April 2, 2023[91](index=91&type=chunk) [Other income (expense), net](index=22&type=section&id=Other%20income%20%28expense%29%2C%20net) This section analyzes the significant improvement in other income (expense), net, primarily driven by the gain on the Good Health and R.W. Garcia Sale - Other income (expense), net, significantly improved to **$19.3 million** income for Q1 2024, from **$(15.0) million** expense for Q1 2023[92](index=92&type=chunk) - This improvement was primarily driven by a **$44.0 million** gain on the Good Health and R.W. Garcia Sale, partially offset by an **$9.6 million** increase in the loss on remeasurement of warrant liability[92](index=92&type=chunk) [Income taxes](index=23&type=section&id=Income%20taxes) This section discusses the income tax expense for the period, primarily attributing the increase to the Good Health and R.W. Garcia Sale - Income tax expense was **$26.5 million** for Q1 2024, compared to a **$2.6 million** benefit for Q1 2023, primarily attributable to the Good Health and R.W. Garcia Sale[93](index=93&type=chunk) [Non-GAAP Financial Measures](index=23&type=section&id=Non-GAAP%20Financial%20Measures) This section explains the company's use of non-GAAP financial measures, specifically EBITDA and Adjusted EBITDA, to provide investors with additional insights into operating performance and facilitate comparisons by excluding certain non-cash, acquisition, divestiture, transformation, and financing-related costs - Non-GAAP financial measures like EBITDA and Adjusted EBITDA are used to evaluate operating performance, identify trends, and make decisions, excluding certain non-cash items, acquisition/divestiture costs, business transformation initiatives, and financing-related costs[94](index=94&type=chunk)[96](index=96&type=chunk) [EBITDA and Adjusted EBITDA](index=23&type=section&id=EBITDA%20and%20Adjusted%20EBITDA) This subsection presents a reconciliation of net loss to EBITDA and Adjusted EBITDA, highlighting key adjustments for the current and prior year periods EBITDA and Adjusted EBITDA Reconciliation | (dollars in millions) | Thirteen weeks ended March 31, 2024 | Thirteen weeks ended April 2, 2023 | | :---------------------------------- | :---------------------------------- | :--------------------------------- | | Net loss | $2.4 | $(14.5) | | EBITDA | $60.2 | $17.0 | | Adjusted EBITDA | $43.4 | $40.4 | | Adjusted EBITDA as a % of Net Sales | 12.5 % | 11.5 % | - Key adjustments for Q1 2024 include **$(38.4) million** for Acquisition, Divestiture and Integration (reflecting the **$44.0 million** gain on sale of business), **$11.8 million** for Loss on Remeasurement of Warrant Liability, and **$5.8 million** for Business Transformation Initiatives[98](index=98&type=chunk)[102](index=102&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's sources and uses of cash, financing strategy, ABL facility availability, cash requirements, and off-balance sheet arrangements, emphasizing its ability to meet financial obligations and maintain a prudent capital structure - Cash provided by operating activities, the revolving credit facility, term loans, and derivative financial instruments are expected to provide sufficient liquidity for working capital, capital expenditures, and contractual obligations[103](index=103&type=chunk) - The company's financing strategy aims to maintain a prudent capital structure, using short-term debt for operations and a combination of equity and long-term debt for base working capital and non-current assets[104](index=104&type=chunk) - Availability under the ABL facility was **$151.9 million** as of March 31, 2024, down from **$158.4 million** at December 31, 2023[105](index=105&type=chunk) - Cash requirements include funding operations, acquisitions, stockholder returns (dividends), property/plant/equipment, long-term debt repayments, deferred taxes, and operating lease liabilities[107](index=107&type=chunk) [Off-Balance Sheet Arrangements](index=26&type=section&id=Off-Balance%20Sheet%20Arrangements) This subsection details the company's outstanding purchase commitments for key ingredients and partial guarantees on Independent Operator (IO) loans - Outstanding purchase commitments for key ingredients totaled **$97.1 million** as of March 31, 2024, used to economically hedge commodity input prices[108](index=108&type=chunk) - The company partially guarantees loans made to IOs by Bank of America (**$56.3 million** outstanding) and two other banks (**$2.5 million** outstanding) for route purchases, with maximum exposure of **25%** of the outstanding loan balance. These loans are collateralized by the routes[109](index=109&type=chunk) [Cash Flow](index=26&type=section&id=Cash%20Flow) This subsection analyzes the net cash flows from operating, investing, and financing activities, highlighting the impact of the recent divestiture and debt paydown - Net cash used in operating activities was **$(9.1) million** for Q1 2024, slightly higher than **$(8.4) million** for Q1 2023, primarily due to changes in accounts payable and accrued expenses[111](index=111&type=chunk) - Net cash provided by investing activities was **$158.0 million** for Q1 2024 (vs. **$(14.0) million** used in Q1 2023), primarily driven by **$167.5 million** in proceeds from the sale of business[112](index=112&type=chunk) - Net cash used in financing activities was **$(154.0) million** for Q1 2024 (vs. **$7.5 million** provided in Q1 2023), primarily due to debt paydown utilizing divestiture proceeds[113](index=113&type=chunk) [Debt Covenants](index=26&type=section&id=Debt%20Covenants) This subsection confirms the company's compliance with financial covenants for its Term Loan B and ABL facility as of March 31, 2024 - UBH and its subsidiaries were in compliance with their financial covenants for the Term Loan B and ABL facility as of March 31, 2024[114](index=114&type=chunk) [New Accounting Pronouncements](index=26&type=section&id=New%20Accounting%20Pronouncements) This subsection refers to Note 1 for details on recently issued accounting standards - Refer to Note 1. Operations and Summary of Significant Accounting Policies for details on recently issued accounting standards[115](index=115&type=chunk) [Application of Critical Accounting Policies and Estimates](index=26&type=section&id=Application%20of%20Critical%20Accounting%20Policies%20and%20Estimates) This subsection states that there were no material changes to critical accounting policies and estimates from the prior annual report - There were no material changes to critical accounting policies and estimates from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2023[116](index=116&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=27&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section refers to the company's Annual Report on Form 10-K for detailed quantitative and qualitative disclosures about market risk, stating that there have been no material changes to these exposures since the previous filing - For detailed disclosures about market risk, refer to Item 7A of the Annual Report on Form 10-K for the year ended December 31, 2023[117](index=117&type=chunk) - There have been no material changes to the company's exposures to market risk since the filing of the Annual Report on Form 10-K for December 31, 2023[117](index=117&type=chunk) [Item 4. Controls and Procedures](index=27&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures and reports that there were no material changes in internal control over financial reporting during the most recent fiscal quarter [Evaluation of Disclosure Controls and Procedures](index=27&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This subsection confirms the effectiveness of the company's disclosure controls and procedures at a reasonable assurance level - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures are effective at a level of reasonable assurance[118](index=118&type=chunk) [Changes in Internal Control Over Financial Reporting](index=27&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) This subsection reports no material changes in the company's internal control over financial reporting during the most recent fiscal quarter - There were no material changes in the company's internal control over financial reporting during the most recent fiscal quarter[119](index=119&type=chunk) [PART II – OTHER INFORMATION](index=27&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This part includes disclosures on legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits [Item 1. Legal Proceedings](index=27&type=section&id=Item%201.%20LEGAL%20PROCEEDINGS) This section states that the company is involved in routine legal actions incidental to its business but does not anticipate any currently pending proceedings to have a material adverse effect on its financial condition or operations - The company is involved in litigation and other matters incidental to its normal business activities[120](index=120&type=chunk) - Management believes that no currently pending legal proceeding is likely to have a material adverse effect on the company's business, prospects, financial condition, cash flows, or results of operations[120](index=120&type=chunk) [Item 1A. Risk Factors](index=27&type=section&id=Item%201A.%20RISK%20FACTORS) This section refers readers to the company's Annual Report on Form 10-K for a comprehensive list of risk factors, confirming that no material changes have occurred since that filing - Risk factors are set forth in Item 1A. 'Risk Factors' of the Annual Report on Form 10-K for the year ended December 31, 2023[121](index=121&type=chunk) - There have been no material changes to the company's risk factors since the filing of the Annual Report on Form 10-K[121](index=121&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=27&type=section&id=Item%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section reports that there were no unregistered sales of equity securities or use of proceeds during the period - No unregistered sales of equity securities and use of proceeds occurred during the period[122](index=122&type=chunk) [Item 3. Defaults Upon Senior Securities](index=27&type=section&id=Item%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) This section reports that there were no defaults upon senior securities during the period - No defaults upon senior securities occurred during the period[123](index=123&type=chunk) [Item 4. Mine Safety Disclosures](index=27&type=section&id=Item%204.%20MINE%20SAFETY%20DISCLOSURES) This section reports that there were no mine safety disclosures - No mine safety disclosures were reported[124](index=124&type=chunk) [Item 5. Other Information](index=27&type=section&id=Item%205.%20OTHER%20INFORMATION) This section discloses that a trust affiliated with a director adopted a Rule 10b5-1 trading plan for the potential sale of Class A Common Stock - The Roger K. Deromedi Revocable Trust, affiliated with Lead Independent Director Roger Deromedi, adopted a Rule 10b5-1 trading plan[126](index=126&type=chunk) - The plan provides for the potential sale of up to **506,270 shares** of Class A Common Stock between June 11, 2024, and February 7, 2025[127](index=127&type=chunk) [Item 6. Exhibits](index=28&type=section&id=Item%206.%20EXHIBITS) This section lists all exhibits furnished as part of the report, including various agreements, corporate documents, certifications, and XBRL data files - The exhibit index includes the Purchase Agreement, Certificate of Domestication, Certificate of Incorporation, Bylaws, Amendment No. 5 to First Lien Credit Agreement, CEO/CFO Certifications, and Inline XBRL documents[130](index=130&type=chunk) [Signatures](index=29&type=section&id=SIGNATURES) This section contains the signature of Ajay Kataria, Executive Vice President, Chief Financial Officer and Chief Officer, certifying the report on behalf of Utz Brands, Inc - The report is signed by Ajay Kataria, Executive Vice President, Chief Financial Officer and Chief Officer, on May 2, 2024[132](index=132&type=chunk)

Utz Brands Reports First Quarter 2024 Results Hanover, PA – May 2, 2024 – Utz Brands, Inc. (NYSE: UTZ) ("Utz" or the "Company"), a leading U.S. manufacturer of branded salty snacks and a small-cap growth and value Staples equity, today reported financial results for the Company's fiscal first quarter ended March 31, 2024. 1Q'24 Summary (1) FY'24 Outlook (1) On an As-Converted Basis See the description of the Non-GAAP financial measures used in this press release and reconciliations of such Non-GAAP measures ...

Utz Brands, Inc. (NYSE:UTZ) Q4 2023 Results Conference Call February 29, 2024 8:30 AM ET Company Participants Kevin Powers - Head of Investor Relations Howard Friedman - Chief Executive Officer Ajay Kataria - Chief Financial Officer Cary Devore - Chief Operating and Transformation Officer Conference Call Participants Andrew Lazar - Barclays Rob Dickerson - Jefferies Peter Galbo with - of America Michael Lavery - Piper Sandler Robert Moskow - TD Cowen Rupesh Parikh - Oppenheimer Nik Modi - RBC Capital Market ...

[PART I](index=7&type=section&id=Part%20I) [Business](index=7&type=section&id=Item%201.%20Business) Utz Brands, Inc. is a leading U.S. salty snack manufacturer, founded in 1921, producing a broad range of snacks distributed nationally [Overview](index=7&type=section&id=Overview) Utz Brands is a leading U.S. salty snack manufacturer with national distribution and a focus on strategic growth - Utz Brands, Inc. is a leading U.S. manufacturer of branded salty snacks, founded in 1921 in Hanover, Pennsylvania[28](index=28&type=chunk) - The company's products are found in **approximately half of U.S. households** and it is the **second-largest producer** of branded salty snacks in its Core Geographies as of December 31, 2023[28](index=28&type=chunk) - Operates **14 manufacturing facilities** and distributes nationally through direct shipments, distributors, and **approximately 2,250 DSD routes**[29](index=29&type=chunk) - Growth strategies include driving productivity, marketing and innovation investments, and strategic acquisitions[30](index=30&type=chunk) [Recent Acquisitions and Dispositions](index=7&type=section&id=Recent%20Acquisitions%20and%20Dispositions) The company completed a snack food manufacturing facility acquisition in 2022 and sold two brands and facilities in February 2024 - In April 2022, the Company purchased a snack food manufacturing facility in Kings Mountain, North Carolina for **$38.4 million**[31](index=31&type=chunk) - During fiscal year 2022, the Company bought out and terminated contracts of multiple distributors, resulting in an expense of **$23.0 million**[31](index=31&type=chunk) - On February 5, 2024, the Company sold the Good Health® and R.W. Garcia® brands, two manufacturing facilities, and related assets to affiliates of Our Home™ for **$182.5 million**[32](index=32&type=chunk)[33](index=33&type=chunk) - Post-closing of the Our Home™ transaction, the parties will operate under reciprocal co-manufacturing agreements[33](index=33&type=chunk) [Recent Developments](index=8&type=section&id=Recent%20Developments) Utz Brands introduced a long-term growth strategy in 2023, focusing on marketing, innovation, geographic expansion, and supply chain transformation - During 2023, Utz Brands introduced a long-term growth strategy focused on accelerating investments in marketing and innovation to drive top-line growth and market share gains[34](index=34&type=chunk) - The strategy includes further penetrating Expansion Geographies, transforming the supply chain for cost-efficiency, enhancing the independent operator DSD system, and improving balance sheet flexibility[34](index=34&type=chunk) [Brands](index=8&type=section&id=Brands) The company manages a portfolio of Power Brands for growth and Foundation Brands for cash flow generation - The company strategically manages its brand portfolio by segregating into Power Brands (higher growth, margins, innovation focus) and Foundation Brands (cash flow generation)[35](index=35&type=chunk) - Power Brands include Utz, On The Border®, Zapp's®, Golden Flake® Pork Skins, TORTIYAHS!, Hawaiian®, Boulder Canyon®, Bachman®, Tim's Cascade® Snacks, 'Dirty' Potato Chips®, and TGI Fridays®[36](index=36&type=chunk) Utz Brand Retail Sales Performance (2023) | Metric | Value | | :-------------------- | :-------------------- | | Retail Sales (2023) | >$850 million | | CAGR (2020-2023) | ~9.4% | | US Salty Snack Brand Rank | Top 10 | - On The Border (OTB) is the **2 unflavored tortilla chip brand** as of December 31, 2023[38](index=38&type=chunk) - Boulder Canyon is the **2 potato chip brand in the Natural channel**, **growing 27% in 2023**, with its 'Canyon Cut' avocado oil-based chip being the **1 selling salty snack item**[39](index=39&type=chunk) - In fiscal year 2023, Foundation Brands included Golden Flake® Chips and Cheese, Snyder of Berlin®, R.W. Garcia®, and Good Health®, with the latter two sold in February 2024[41](index=41&type=chunk) [Products](index=9&type=section&id=Products) Utz Brands produces a broad range of salty snack foods, leveraging in-house capabilities for differentiation and responsiveness - The company produces a broad range of salty snack foods, including potato chips, tortilla chips, pretzels, cheese snacks, veggie snacks, pub/party mixes, pork skins, ready-to-eat popcorn, salsa, and dips[42](index=42&type=chunk) - Its broad product assortment and in-house production capabilities differentiate it from competitors, enabling greater distribution, shelf space, and rapid response to evolving consumer needs[43](index=43&type=chunk) [Product Innovation](index=9&type=section&id=Product%20Innovation) New product innovation is crucial in the salty snacks category, with successful launches like Zapp's Pretzel Stix and Utz Mike's Hot Honey potato chips - New product innovation is critical in the salty snacks category, with a focus on new forms, flavors, textures, and ingredients[44](index=44&type=chunk) - Zapp's Sinfully Seasoned Pretzel Stix achieved **$20 million** in retail sales and became a **top 10 pretzel brand** in its first year[44](index=44&type=chunk) - Utz Mike's Hot Honey potato chips, initially a successful Summer Limited Time Offer, were transitioned to an everyday item due to strong performance[44](index=44&type=chunk) - The company plans to increase investments in market research and leverage its flexible manufacturing and DSD distribution platform to streamline innovation and speed to market[46](index=46&type=chunk)[47](index=47&type=chunk) [Marketing, Advertising, and Consumer Engagement](index=10&type=section&id=Marketing%2C%20Advertising%2C%20and%20Consumer%20Engagement) Marketing strategy focuses on building Power Brand equity through consumer marketing and shifting spending towards digital advertising for long-term growth - Marketing strategy focuses on driving stronger consumer pull and building brand equity for Power Brands through consumer marketing, sales incentives, and trade promotions[48](index=48&type=chunk) - The company is shifting spending towards more consumer awareness and brand-building advertising, particularly in digital and social media, to support geographic expansion and long-term net sales growth[48](index=48&type=chunk) Marketing and Advertising Expenses (FY2023) | Expense Category | Amount (in millions) | | :--------------------------------- | :------------------- | | Consumer Marketing and Advertising | $12.3 | | Cooperative Advertising | $29.8 | [Customers](index=10&type=section&id=Customers) Utz Brands maintains long-term relationships with its top retail customers, with the top 10 representing approximately 40% of invoiced sales - In fiscal year 2023, the top 10 customers, all retailers, represented **approximately 40% of invoiced sales**, with one customer accounting for **over 10%**[49](index=49&type=chunk) - The company benefits from long-term relationships, averaging **over 20 years** with its top 15 retail customers[49](index=49&type=chunk) [International](index=10&type=section&id=International) Utz Brands primarily focuses on domestic growth, with substantially all sales occurring in the United States, limiting international exposure - Substantially all of Utz Brands' invoiced sales in fiscal year 2023 occurred in the United States, with a focus on domestic growth[50](index=50&type=chunk) - This domestic focus limits exposure to global economic conditions and foreign exchange fluctuations[50](index=50&type=chunk) [Competition](index=10&type=section&id=Competition) The salty snacking industry is highly competitive, with Utz Brands holding a strong market position and seeking expansion opportunities in a fragmented market - The salty snacking industry is highly competitive, with principal competitive factors including taste, convenience, product variety, quality, price, brand awareness, and distribution[51](index=51&type=chunk) - Key competitors include PepsiCo (Frito Lay), Campbell's (Snyder's-Lance), Kellogg's (Pringles), General Mills, Grupo Bimbo, Hershey's, Hain Celestial, and Arca Continental (Wise), as well as private label brands[52](index=52&type=chunk) Utz Brands Market Position (as of Dec 31, 2023) | Metric | Position | Market Share | | :--------------------------------- | :------- | :----------- | | US Salty Snack Brand Platform | 3 | 4.4% | | Core Geographies Brand Platform | 2 | >7% | | Core Geographies Pork Skins | 2 | 17% | | Core Geographies Pretzels | 2 | 15% | | Core Geographies Potato Chips | 3 | 12% | | Core Geographies Cheese Snacks | 3 | 7% | | Core Geographies Tortilla Chips | 3 | 4% | - The company sees an attractive opportunity to expand by acquiring or displacing smaller regional or product-specific competitors in a fragmented market[54](index=54&type=chunk) [Supply Chain](index=11&type=section&id=Supply%20Chain) Utz Brands manages its supply chain through diversified ingredient sourcing, hedging, 10 manufacturing facilities, and a hybrid distribution system - Principal ingredients include potatoes, oil, flour, wheat, corn, cheese, spices, and seasonings, generally available from multiple suppliers with no single-supplier arrangements for top 10 inputs[55](index=55&type=chunk) - Mitigates input price changes through fixed-price forward purchases and commodity hedging arrangements, covering approximately **36%** of budgeted direct material needs for fiscal year 2024[56](index=56&type=chunk) - Operates **10 company-operated manufacturing facilities** with an annual capacity of approximately **500 million pounds** of salty snacks (post-Our Home Transaction)[57](index=57&type=chunk) - Utilizes a flexible, scalable hybrid distribution system combining Direct-Store-Delivery (DSD), Direct-to-Warehouse (DTW), direct-to-consumer, and third-party distributors[58](index=58&type=chunk) - The DSD network includes approximately **2,250 routes**, primarily managed by 2,200 independent operators (IOs), reaching over 83,000 retail stores[61](index=61&type=chunk) [Food Safety and Quality](index=12&type=section&id=Food%20Safety%20and%20Quality) Food safety and quality are top priorities, with manufacturing facilities adhering to SQF certifications and GMPs, supported by robust supplier processes and testing - Food safety and quality are top priorities, with manufacturing facilities implementing Safe Quality Food (SQF) certifications and Good Manufacturing Practices (GMPs)[64](index=64&type=chunk) - Suppliers are required to have robust processes, and products undergo real-time testing and regular third-party laboratory verification[64](index=64&type=chunk) [Human Capital](index=12&type=section&id=Human%20Capital) The company fosters an inclusive culture, focusing on talent retention, diversity, and safety, while optimizing its workforce through business transformation - The company fosters an inclusive workplace culture based on family values, focusing on attracting, developing, and retaining key personnel through competitive wages, benefits, and training[65](index=65&type=chunk)[66](index=66&type=chunk) - A comprehensive diversity, equity, and inclusion strategy is underway, developed in partnership with a nationally recognized consulting firm[68](index=68&type=chunk) - The health and safety approach is based on creating a culture of collective learning, aligned with OSHA 1910 standards, with pillars including associate engagement, training, compliance, and performance metrics[70](index=70&type=chunk)[71](index=71&type=chunk)[75](index=75&type=chunk) - As of December 31, 2023, the company employed approximately **3,400 full-time** and **254 part-time associates**[72](index=72&type=chunk) - The number of full-time associates and selling, distribution, and administrative expenses have been reduced through business transformation initiatives, including the DSD shift to IOs and network optimization[73](index=73&type=chunk) [Sustainability](index=14&type=section&id=Sustainability) Utz Brands integrates ESG issues into its program, guided by frameworks like SASB and TCFD, and publishes an annual ESG Report - Utz Brands recognizes the importance of Environmental, Social and Governance (ESG) issues, using frameworks like SASB, TCFD, and U.N. Sustainable Development Goals (SDGs) to inform its program[74](index=74&type=chunk) - An ESG Committee was formed in 2020, and the 2022 ESG Report, outlining strategic priorities and progress, was released in August 2023[74](index=74&type=chunk)[75](index=75&type=chunk) [Intellectual Property](index=15&type=section&id=Intellectual%20Property) The company owns numerous important trademarks and actively protects its intellectual property rights, also licensing third-party brands - The company owns numerous domestic and foreign trademarks, including Utz, ON THE BORDER, Zapp's, Golden Flake, Boulder Canyon, and Hawaiian, which are important to its business[76](index=76&type=chunk) - It actively protects its intellectual property rights through various methods, including watch services and enforcement under intellectual property laws[77](index=77&type=chunk) - Utz Brands licenses certain third-party brand names for use on its products, such as TGI Friday's, HeluvaGood, Grillo's Pickles, and Mike's Hot Honey, which represented approximately **2.4%** of 2023 invoice sales[79](index=79&type=chunk) [Seasonality](index=16&type=section&id=Seasonality) Utz Brands experiences seasonal fluctuations in retail sales, with higher demand from April to September and in December, impacting cash flow patterns - The company experiences seasonal fluctuations in retail sales, with higher demand **from April to September and in December** due to increased consumer activity and retailer promotions[81](index=81&type=chunk) - Seasonal cash flow patterns include decreases in working capital levels in the fourth quarter and increases in the first quarter[81](index=81&type=chunk) [Government Regulation and Compliance](index=16&type=section&id=Government%20Regulation%20and%20Compliance) Utz Brands is subject to various federal, state, and local regulations governing its operations and actively monitors compliance - Utz Brands is subject to various federal, state, and local laws and regulations in the United States governing product manufacturing, distribution, advertising, and safety[82](index=82&type=chunk) - Key federal agencies include the Federal Trade Commission (FTC), U.S. Food and Drug Administration (FDA), U.S. Department of Agriculture (USDA), U.S. Environmental Protection Agency (EPA), and Occupational Safety and Health Administration (OSHA)[82](index=82&type=chunk) - The company regularly monitors these regulatory requirements and its compliance[83](index=83&type=chunk) [Available Information](index=16&type=section&id=Available%20Information) Utz Brands provides public access to its SEC filings and investor relations information online - Utz Brands provides access to its annual, quarterly, and current reports, proxy statements, and other SEC filings free of charge on its investor relations website (www.investors.utzsnacks.com) and through the SEC's website (www.sec.gov)[84](index=84&type=chunk) [Risk Factors](index=17&type=section&id=Item%201A.%20Risk%20Factors) Utz Brands faces numerous business and securities ownership risks that could materially affect its financial condition and operations - Gross profit margins may be impacted by variations in raw materials pricing, retail customer ordering patterns, requirements and mix, sales velocities, and required promotional support[86](index=86&type=chunk) - Demand for products may be adversely affected by changes in consumer preferences and tastes or if the company is unable to innovate or market products effectively[88](index=88&type=chunk) - The company operates in the highly competitive snack food industry, facing competition from multinational, regional, local, and private label brands[98](index=98&type=chunk)[103](index=103&type=chunk) - Disruption to manufacturing operations, supply chain, or distribution channels (DSD, DTW) could impair the ability to produce or deliver finished products and negatively impact operating results[114](index=114&type=chunk) - Future results of operations may be adversely affected by input cost inflation, increased labor and employee-related expenses, and a continued shortage of qualified labor[115](index=115&type=chunk)[118](index=118&type=chunk)[120](index=120&type=chunk) - The company is a holding company, and its ability to pay taxes, make payments under the Tax Receivable Agreement (TRA), and pay dividends is dependent upon distributions made by its subsidiaries[187](index=187&type=chunk) - Pursuant to the TRA, the company is required to pay **85%** of certain tax savings realized, and these payments may be substantial and could exceed actual tax benefits[192](index=192&type=chunk)[195](index=195&type=chunk) - Delaware law, the Certificate of Incorporation, and Bylaws contain anti-takeover provisions that could limit stockholders' ability to take certain actions or delay/discourage takeover attempts[201](index=201&type=chunk) [Unresolved Staff Comments](index=42&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) No unresolved written comments from the SEC staff were received regarding periodic or current reports - No unresolved written comments from the SEC staff regarding periodic or current reports issued 180 days or more preceding the end of the 2023 fiscal year[220](index=220&type=chunk) [Cybersecurity](index=43&type=section&id=Item%201C.%20Cybersecurity) Utz Brands maintains a NIST CSF-based cybersecurity program, overseen by the Audit Committee, with no material incidents in FY2023 - The company maintains a cybersecurity risk management program integrated into its overall enterprise risk management, designed based on the National Institute of Standards and Technology Cybersecurity Framework (NIST CSF)[221](index=221&type=chunk)[222](index=222&type=chunk) - The program includes a Security Incident Response Plan (SIRP) led by the Chief Information Officer (CIO) and a Security Incident Response Team, with multi-layered protection, continuous mitigation, and regular assessments[223](index=223&type=chunk)[224](index=224&type=chunk) - For the fiscal year ended December 31, 2023, the company did not experience any cybersecurity incidents that materially affected its business strategy, results of operations, or financial condition[224](index=224&type=chunk) - The Board of Directors, specifically the Audit Committee, oversees cybersecurity risks, receiving regular updates from the CIO on activities, strategies, and trends[226](index=226&type=chunk)[227](index=227&type=chunk)[228](index=228&type=chunk) [Properties](index=44&type=section&id=Item%202.%20Properties) Utz Brands operates 10 manufacturing sites and 24 owned distribution centers, with headquarters in Hanover, PA - The corporate headquarters is located at 900 High Street, Hanover, Pennsylvania, and the company owns other corporate office spaces in Hanover[230](index=230&type=chunk) - As of February 14, 2024, Utz Brands operated **10 principal manufacturing sites** across the United States[231](index=231&type=chunk) - The company also operated **24 owned warehousing and distribution centers** and leased approximately 180 properties (warehouses, offices, small storage bins) across the United States[232](index=232&type=chunk)[233](index=233&type=chunk) - The properties are generally well-maintained and considered adequate for current and foreseeable business needs[233](index=233&type=chunk) [Legal Proceedings](index=44&type=section&id=Item%203.%20Legal%20Proceedings) Utz Brands is involved in incidental legal actions but is not currently party to any material proceedings - The company is involved in litigation and other matters incidental to its normal business activities[234](index=234&type=chunk) - Management does not believe the company is currently party to any material legal proceeding[234](index=234&type=chunk) [Mine Safety Disclosures](index=44&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable - This item is not applicable[235](index=235&type=chunk) [PART II](index=44&type=section&id=Part%20II) [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=44&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Utz Brands' Class A Common Stock trades on NYSE; the company declared $18.5 million in cash dividends in FY2023 - Utz Brands' Class A Common Stock is traded on the NYSE under the symbol 'UTZ'[237](index=237&type=chunk) - As of February 14, 2024, there were **29 holders of record** of Class A Common Stock and **two holders of record** of Class V Common Stock[239](index=239&type=chunk) Cash Dividends Declared on Class A Common Stock | Fiscal Year | Cash Dividends (in millions) | Annual Dividend Rate per Share | | :---------- | :--------------------------- | :----------------------------- | | 2023 | $18.5 | $0.228 | | 2022 | $17.6 | $0.219 | | 2021 | $15.7 | $0.204 | - The declaration and payment of dividends are at the discretion of the Company Board, considering available cash, borrowings, legal funds, and obligations (including taxes and TRA payments)[241](index=241&type=chunk) [Reserved](index=45&type=section&id=Item%206.%20Reserved) This item is reserved and contains no information - This item is reserved[245](index=245&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=47&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes Utz Brands' financial condition and results for FY2023, covering key developments, trends, and liquidity - The discussion and analysis cover the fiscal year ended December 31, 2023, compared to the fiscal year ended January 1, 2023[248](index=248&type=chunk)[264](index=264&type=chunk) - Utz Brands is a leading U.S. manufacturer of branded salty snacks, with products in **approximately 49% of U.S. households** as of December 31, 2023[249](index=249&type=chunk) - The company monitors long-term demographics, consumer trends, demand, operating costs, taxes, and financing costs, including exposure to interest rate changes[250](index=250&type=chunk)[251](index=251&type=chunk)[254](index=254&type=chunk)[255](index=255&type=chunk)[257](index=257&type=chunk) - Key developments affecting comparability include acquisitions and dispositions, commodity trends, and independent operator (IO) conversions[258](index=258&type=chunk)[259](index=259&type=chunk)[261](index=261&type=chunk) - The company uses non-GAAP financial measures, such as EBITDA and Adjusted EBITDA, to evaluate operating performance and facilitate comparisons[276](index=276&type=chunk)[278](index=278&type=chunk) [Overview](index=47&type=section&id=Overview_7) Utz Brands is a leading U.S. salty snack manufacturer with a diverse brand portfolio and national distribution - Utz Brands, founded in 1921, is a leading U.S. manufacturer of branded salty snacks, including potato chips, tortilla chips, and pretzels[249](index=249&type=chunk) - Its portfolio of brands, including Utz®, ON THE BORDER®, Zapp's®, and Boulder Canyon®, reaches **approximately 49% of U.S. households**[249](index=249&type=chunk) - As of December 31, 2023, the company operates **14 manufacturing facilities** and distributes products nationally through DSD routes, direct shipments, and distributors[249](index=249&type=chunk) - Based on 2023 retail sales, Utz Brands is the **second-largest producer** of branded salty snacks in its core geographies[249](index=249&type=chunk) [Key Developments and Trends](index=47&type=section&id=Key%20Developments%20and%20Trends) The U.S. salty snacks market is growing, and Utz Brands manages operating costs through various initiatives while facing increased interest rates - The U.S. salty snacks category is an attractive and growing market, valued at **$38 billion** within the broader **$129 billion** U.S. snack foods market as of December 31, 2023[251](index=251&type=chunk) - The salty snacks category grew at an approximate **10.1%** compound annual growth rate (CAGR) from 2019 through 2023, driven by increased consumption and inflation[251](index=251&type=chunk) Retail Sales Growth (FY2023 vs. FY2022) | Metric | FY2023 Growth | | :--------------------------------- | :------------ | | U.S. Salty Snacks Retail Sales | 8.7% | | Utz Brands Retail Sales | 6.3% | - Operating costs are managed through annual cost saving and productivity initiatives, sourcing and hedging programs, pricing actions, and ongoing efforts to reduce supply chain and overhead costs[254](index=254&type=chunk) - The company had **$851.5 million** in variable rate indebtedness as of December 31, 2023, with interest rate hedges covering **$584.6 million** of debt[257](index=257&type=chunk) - The weighted average interest rate for the fiscal year ended December 31, 2023, was **6.3%**, up from **4.7%** in the prior fiscal year[257](index=257&type=chunk) [Recent Developments and Significant Items Affecting Comparability](index=48&type=section&id=Recent%20Developments%20and%20Significant%20Items%20Affecting%20Comparability) Key factors affecting comparability include a 2022 facility acquisition, distributor contract terminations, stabilizing commodity costs, and IO model conversions - In April 2022, the company purchased a new snack food manufacturing facility in Kings Mountain, North Carolina for **$38.4 million**[258](index=258&type=chunk) - Distributor contract terminations resulted in expenses of **$1.5 million** for FY2023 and **$23.0 million** for FY2022[258](index=258&type=chunk) - Commodity costs, which increased significantly in FY2021 and FY2022, stabilized in FY2023, with the company using buying-forward and hedging to mitigate volatility[259](index=259&type=chunk) - The multi-year strategy to convert company-owned route sales professional (RSP) routes to the independent operator (IO) model was substantially complete by December 31, 2023, leading to decreased selling costs and increased IO discounts[261](index=261&type=chunk) - The company is required to comply with SEC's Section 302 of the Sarbanes-Oxley Act and has been subject to independent registered public accounting firm attestation on internal control over financial reporting since FY2022[262](index=262&type=chunk) [Results of Operations](index=49&type=section&id=Results%20of%20Operations) Utz Brands reported increased net sales and gross profit in FY2023, but also a higher net loss due to increased interest expense and a shift in income taxes Selected Financial Data (in thousands) | Metric | FY2023 | FY2022 | | :--------------------------------------- | :------- | :------- | | Net sales | $1,438,237 | $1,408,401 | | Cost of goods sold | $981,751 | $959,344 | | Gross profit | $456,486 | $449,057 | | Selling, distribution and administrative expenses | $433,119 | $444,404 | | Income from operations | $16,017 | $5,344 | | Interest expense | $(60,590) | $(44,424) | | Net loss | $(40,032) | $(14,041) | | Net loss attributable to controlling interest | $(24,937) | $(392) | - Net sales increased by **$29.8 million** (**2.1%**) in FY2023, primarily due to pricing actions (**4.6%** increase), partially offset by a volume/mix decline (**1.8%**) and IO conversions (**0.7%**)[266](index=266&type=chunk) - Gross profit increased by **$7.4 million** (**1.7%**) in FY2023, driven by productivity and pricing initiatives, but gross profit margin declined to **31.7%** from **31.9%** due to commodity and wage inflation and higher inbound freight costs[270](index=270&type=chunk)[271](index=271&type=chunk) - Selling, distribution, and administrative expenses decreased by **$11.3 million** (**2.5%**) in FY2023, mainly due to lower acquisition and integration costs and reductions from IO conversions, offset by impairments and higher stock-based compensation[272](index=272&type=chunk) - Other expense, net, increased to **$55.3 million** in FY2023 from **$43.3 million** in FY2022, primarily due to higher interest expense (**$60.6 million** in FY2023) driven by increased interest rates on unhedged debt[274](index=274&type=chunk) - Income taxes shifted from a benefit of **$23.9 million** in FY2022 to an expense of **$0.8 million** in FY2023, with the prior year's benefit largely from the removal of a valuation allowance[275](index=275&type=chunk) [Non-GAAP Financial Measures](index=52&type=section&id=Non-GAAP%20Financial%20Measures) Utz Brands utilizes non-GAAP measures like EBITDA and Adjusted EBITDA to assess operating performance and identify underlying trends - Utz Brands uses non-GAAP financial measures, including EBITDA and Adjusted EBITDA, to evaluate operating performance, facilitate historical comparisons, and identify underlying trends[276](index=276&type=chunk)[279](index=279&type=chunk) - EBITDA is defined as Net Income before Interest, Income Taxes, and Depreciation and Amortization[278](index=278&type=chunk) - Adjusted EBITDA further excludes certain non-cash items, acquisition and integration costs, business transformation initiatives, and financing-related costs[278](index=278&type=chunk) EBITDA and Adjusted EBITDA Reconciliation (in millions) | Metric | FY2023 | FY2022 | | :--------------------------------------- | :----- | :----- | | Net loss | $(40.0) | $(14.0) | | EBITDA | $98.9 | $91.7 | | Adjusted EBITDA | $187.2 | $170.5 | | Adjusted EBITDA as a % of Net Sales | 13.0% | 12.1% | - Significant non-GAAP adjustments in FY2023 included **$15.5 million** in share-based compensation, **$13.7 million** loss on sale of the Bluffton, Indiana plant, **$12.6 million** in asset impairments, and **$31.0 million** for business transformation initiatives[281](index=281&type=chunk)[282](index=282&type=chunk)[285](index=285&type=chunk) [Liquidity and Capital Resources](index=54&type=section&id=Liquidity%20and%20Capital%20Resources) The company relies on operating cash flow, credit facilities, and derivative instruments for liquidity, maintaining compliance with financial covenants - The company relies on cash from operating activities, its revolving credit facility (ABL), term loans, and derivative financial instruments for liquidity[284](index=284&type=chunk) - The ABL facility's credit limit was increased to **$225.0 million** in July 2023, with **$158.4 million** available for borrowing as of December 31, 2023[285](index=285&type=chunk)[404](index=404&type=chunk) Net Cash Flow (in thousands) | Activity | FY2023 | FY2022 | | :--------------------------------------- | :------- | :------- | | Net cash provided by operating activities | $76,640 | $48,193 | | Net cash used in investing activities | $(48,492) | $(76,067) | | Net cash (used in) provided by financing activities | $(49,055) | $58,906 | - Cash and cash equivalents decreased by **$20.9 million** to **$52.0 million** at December 31, 2023[288](index=288&type=chunk) - The company was in compliance with its financial covenants for the Term Loan B and ABL facility as of December 31, 2023[289](index=289&type=chunk) - Off-balance sheet arrangements include purchase commitments for key ingredients (**$66.7 million** as of Dec 31, 2023) and partial guarantees on Independent Operator (IO) loans[286](index=286&type=chunk)[287](index=287&type=chunk) [Application of Critical Accounting Policies and Estimates](index=56&type=section&id=Application%20of%20Critical%20Accounting%20Policies%20and%20Estimates) Critical accounting policies require significant management judgments and estimates for revenue, goodwill, income taxes, and business combinations - Critical accounting policies require significant management judgments and estimates, particularly for revenue recognition, distribution route purchase and sale transactions, goodwill and indefinite-lived intangibles, income taxes, and business combinations[291](index=291&type=chunk) - Revenue recognition involves estimating variable consideration, including discounts, returns, allowances, and trade promotions, based on historical data[292](index=292&type=chunk)[294](index=294&type=chunk) - Goodwill and other indefinite-lived intangible assets are tested for impairment at least annually, with the FY2023 qualitative analysis concluding no impairment[298](index=298&type=chunk)[301](index=301&type=chunk) - Income taxes are accounted for using the asset and liability method, involving deferred tax assets and liabilities, valuation allowances, and the Tax Receivable Agreement (TRA) liability[302](index=302&type=chunk)[303](index=303&type=chunk) - Business combinations are evaluated to determine if they are asset acquisitions or business combinations, with acquired assets and liabilities recorded at fair value[306](index=306&type=chunk)[307](index=307&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=59&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Utz Brands manages commodity, interest rate, and credit risks through hedging, swaps, and credit evaluations to mitigate financial exposure - The company is exposed to commodity, interest rate, and credit risks, and may use derivative financial instruments to manage these risks[308](index=308&type=chunk) - Commodity risk is mitigated through forward purchase agreements and hedging; a **1% increase** in commodity prices would reduce gross profit by **approximately $6.0 million**[309](index=309&type=chunk) - Interest rate risk on variable-rate debt (based on SOFR) is managed with interest rate swap agreements; these swaps saved **$19.9 million** in interest expense in FY2023[310](index=310&type=chunk) - A **1% increase** in the SOFR rate would have resulted in an additional **$3.3 million** of interest expense during FY2023 based on the unhedged portion of debt[310](index=310&type=chunk) - Credit risk related to accounts and notes receivable is managed through ongoing credit evaluations; net bad debt expense was **$1.2 million** in FY2023, with a reserve of **$2.9 million**[311](index=311&type=chunk) [Financial Statements and Supplementary Data](index=59&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This item presents Utz Brands' audited consolidated financial statements for FY2023, including balance sheets, operations, equity, cash flows, and notes - The item includes the Report of Independent Registered Public Accounting Firm (Grant Thornton LLP) expressing an **unqualified opinion** on the consolidated financial statements for the period ended December 31, 2023[315](index=315&type=chunk) - An **unqualified opinion** was also expressed on the effectiveness of the company's internal control over financial reporting as of December 31, 2023[316](index=316&type=chunk)[324](index=324&type=chunk) - The financial statements include Consolidated Balance Sheets, Statements of Operations and Comprehensive Income (Loss), Statements of Equity, and Statements of Cash Flows[313](index=313&type=chunk) - Customer trade promotions associated with uncollected sales were identified as a critical audit matter due to uncertainty around settlement amount and timing[319](index=319&type=chunk)[320](index=320&type=chunk) - Comprehensive Notes to Consolidated Financial Statements provide detailed disclosures on various accounting policies, financial instruments, and specific accounts[313](index=313&type=chunk) [Consolidated Balance Sheets](index=64&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheet shows a decrease in total assets and equity, with stable goodwill and reduced intangible assets Consolidated Balance Sheet Highlights (in thousands) | Metric | Dec 31, 2023 | Jan 1, 2023 | Change | | :--------------------------------------- | :----------- | :---------- | :------- | | Total Assets | $2,746,736 | $2,840,366 | $(93,630) | | Cash and cash equivalents | $52,023 | $72,930 | $(20,907) | | Accounts receivable, net | $135,130 | $136,985 | $(1,855) | | Inventories | $104,666 | $118,006 | $(13,340) | | Property, plant and equipment, net | $318,881 | $345,198 | $(26,317) | | Goodwill | $915,295 | $915,295 | $0 | | Intangible assets, net | $1,063,413 | $1,099,565 | $(36,152) | | Total Liabilities | $1,363,053 | $1,388,682 | $(25,629) | | Total Equity | $1,383,683 | $1,451,684 | $(68,001) | - Assets held for sale increased to **$7,559 thousand** at December 31, 2023, from zero at January 1, 2023[332](index=332&type=chunk) - The allowance for accounts receivable increased from **$1,815 thousand** at January 1, 2023, to **$2,933 thousand** at December 31, 2023[332](index=332&type=chunk) [Consolidated Statements of Operations And Comprehensive Income (Loss)](index=65&type=section&id=Consolidated%20Statements%20of%20Operations%20And%20Comprehensive%20Income%20%28Loss%29) The company reported a net loss of $40.0 million in FY2023, an increase from the prior year, with a shift to income tax expense Consolidated Statements of Operations Highlights (in thousands) | Metric | FY2023 | FY2022 | FY2021 | | :--------------------------------------- | :------- | :------- | :------- | | Net sales | $1,438,237 | $1,408,401 | $1,180,713 | | Gross profit | $456,486 | $449,057 | $383,909 | | Income from operations | $16,017 | $5,344 | $10,566 | | Interest expense | $(60,590) | $(44,424) | $(34,708) | | Net (loss) income | $(40,032) | $(14,041) | $7,998 | | Net (loss) income attributable to controlling interest | $(24,937) | $(392) | $20,555 | | Basic EPS | $(0.31) | $0.00 | $0.26 | | Diluted EPS | $(0.31) | $0.00 | $0.25 | - The company reported a net loss of **$40.0 million** in FY2023, a significant increase from the **$14.0 million** net loss in FY2022[334](index=334&type=chunk) - Income tax expense was **$0.8 million** in FY2023, compared to an income tax benefit of **$23.9 million** in FY2022[334](index=334&type=chunk) - Other comprehensive loss was **$13.5 million** in FY2023, a shift from a gain of **$47.3 million** in FY2022[335](index=335&type=chunk) [Consolidated Statements of Equity](index=66&type=section&id=Consolidated%20Statements%20of%20Equity) Total equity decreased by $68.0 million in FY2023, primarily due to net loss and cash dividends Consolidated Statements of Equity Highlights (in thousands) | Metric | Jan 1, 2023 | Dec 31, 2023 | Change | | :--------------------------------------- | :---------- | :----------- | :------- | | Total Stockholders' Equity | $703,146 | $669,496 | $(33,650) | | Noncontrolling Interest | $748,538 | $714,187 | $(34,351) | | Total Equity | $1,451,684 | $1,383,683 | $(68,001) | - The decrease in total equity was primarily driven by a net loss attributable to controlling interest of **$24.9 million** and cash dividends declared of **$18.5 million** in FY2023[338](index=338&type=chunk) - Share-based compensation increased additional paid-in capital by **$17.1 million** in FY2023[338](index=338&type=chunk) - Accumulated other comprehensive income decreased by **$7.8 million** attributable to controlling interest in FY2023[338](index=338&type=chunk) [Consolidated Statements of Cash Flows](index=68&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities increased in FY2023, while cash used in investing and financing activities shifted significantly Consolidated Statements of Cash Flows Highlights (in thousands) | Activity | FY2023 | FY2022 | FY2021 | | :--------------------------------------- | :------- | :------- | :------- | | Net cash provided by operating activities | $76,640 | $48,193 | $48,387 | | Net cash used in investing activities | $(48,492) | $(76,067) | $(136,098) | | Net cash (used in) provided by financing activities | $(49,055) | $58,906 | $82,778 | | Net (decrease) increase in cash and cash equivalents | $(20,907) | $31,032 | $(4,933) | | Cash and cash equivalents at end of period | $52,023 | $72,930 | $41,898 | - Net cash provided by operating activities increased by **$28.4 million** in FY2023, driven by a decrease in inventory levels, an increase in cash net income, and faster cash collections on accounts receivable[288](index=288&type=chunk) - Net cash used in investing activities decreased by **$27.6 million** in FY2023, largely due to a **$32.2 million** decrease in purchases of property and equipment[288](index=288&type=chunk) - Net cash used in financing activities was **$49.1 million** in FY2023, a **$108.0 million** increase in cash usage compared to FY2022, primarily attributable to lower net cash borrowings[288](index=288&type=chunk) [Notes to Consolidated Financial Statements](index=70&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed disclosures on accounting policies, acquisitions, asset values, debt, and subsequent events - The notes detail the basis of presentation, significant accounting policies, and the company's transition from an 'emerging growth company' status[343](index=343&type=chunk)[347](index=347&type=chunk) - Information on acquisitions includes Vitner's (2021), Festida Foods (2021), and R.W. Garcia (2021), detailing purchase prices and asset allocations[387](index=387&type=chunk)[389](index=389&type=chunk)[391](index=391&type=chunk) - Property, plant and equipment, net, decreased to **$318.9 million** at December 31, 2023, with details on impairments, facility closures, and sales[394](index=394&type=chunk)[395](index=395&type=chunk)[396](index=396&type=chunk)[397](index=397&type=chunk) - Goodwill remained stable at **$915.3 million**, while net intangible assets decreased to **$1,063.4 million**, with amortization expense of **$37.7 million** in FY2023[399](index=399&type=chunk)[400](index=400&type=chunk) - Long-term debt, including Term Loan B and Real Estate Loan, totaled **$878.5 million** (net of current portion) at December 31, 2023, with the ABL facility credit limit increased to **$225.0 million**[412](index=412&type=chunk)[404](index=404&type=chunk) - The company uses interest rate swap agreements to manage interest rate risk and has outstanding purchase commitments for key ingredients[419](index=419&type=chunk)[423](index=423&type=chunk) - Share-based compensation expense was **$15.3 million** in FY2023, with details on RSUs, PSUs, stock options, and the Employee Stock Purchase Plan[427](index=427&type=chunk) - Contingencies include partial guarantees on Independent Operator (IO) loans and the settlement of a Pennsylvania sales and use tax audit[447](index=447&type=chunk)[448](index=448&type=chunk)[449](index=449&type=chunk)[446](index=446&type=chunk) - The Tax Receivable Agreement (TRA) liability was **$24.3 million**, with an additional **$14.2 million** unrecorded due to a valuation allowance[465](index=465&type=chunk) - Subsequent events include the sale of Good Health® and R.W. Garcia® brands and related facilities for **$182.5 million** on February 5, 2024[481](index=481&type=chunk)[482](index=482&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=100&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) Utz Brands reported no changes in or disagreements with accountants on accounting and financial disclosure - There were no changes in or disagreements with accountants on accounting and financial disclosure[483](index=483&type=chunk) [Controls and Procedures](index=100&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2023 - Management, with CEO and CFO participation, concluded that disclosure controls and procedures were **effective at a level of reasonable assurance** as of December 31, 2023[484](index=484&type=chunk) - Management concluded that internal control over financial reporting was **effective as of December 31, 2023**[487](index=487&type=chunk) - Grant Thornton LLP, an independent registered public accounting firm, audited and attested to the effectiveness of the company's internal control over financial reporting, as stated in their **unqualified report**[488](index=488&type=chunk)[324](index=324&type=chunk) - There were no material changes in the company's internal control over financial reporting during the most recent fiscal quarter[489](index=489&type=chunk) [Other Information](index=102&type=section&id=Item%209B.%20Other%20Information) No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during Q4 2023 - No director or officer adopted or terminated a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the three months ended December 31, 2023[490](index=490&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=102&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable - This item is not applicable[490](index=490&type=chunk) [PART III](index=103&type=section&id=Part%20III) [Directors, Executive Officers and Corporate Governance](index=103&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on executive officers, directors, corporate governance, and ethics is incorporated by reference from the 2024 Proxy Statement - Information regarding executive officers, directors, and nominees for director is incorporated by reference from the 2024 Proxy Statement[492](index=492&type=chunk)[493](index=493&type=chunk) - Information on the Audit Committee and 'audit committee financial expert' status is incorporated by reference from the 2024 Proxy Statement[494](index=494&type=chunk) - Information regarding the Business Code of Conduct and Ethics is incorporated by reference from the 2024 Proxy Statement[495](index=495&type=chunk) [Executive Compensation](index=103&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation details are incorporated by reference from the 2024 Proxy Statement - Information concerning executive compensation is incorporated by reference from the 'Executive and Director Compensation' section of the 2024 Proxy Statement[496](index=496&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=103&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership and equity compensation plan information is incorporated by reference from the 2024 Proxy Statement - Information concerning ownership of voting securities by certain beneficial owners, individual nominees for director, named executive officers, and directors and executive officers as a group is incorporated by reference from the 2024 Proxy Statement[497](index=497&type=chunk) - Information regarding all of the company's equity compensation plans is incorporated by reference from the 'Equity Compensation Plan Information' section of the 2024 Proxy Statement[498](index=498&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=103&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Related party transactions and director independence information is incorporated by reference from the 2024 Proxy Statement - Information required by this item is incorporated by reference from the 'Related Party Transactions - Transactions with Related Persons' and 'Corporate Governance - Director Independence' sections of the 2024 Proxy Statement[499](index=499&type=chunk) [Principal Accounting Fees and Services](index=103&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Principal accounting fees and services information is incorporated by reference from the 2024 Proxy Statement - Information required by this item is incorporated by reference from the 'Audit, Audit-Related, Tax and All Other Fees' section of the 2024 Proxy Statement[500](index=500&type=chunk) [PART IV](index=104&type=section&id=Part%20IV) [Exhibits and Financial Statement Schedules](index=104&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This item lists financial statements and exhibits, with schedules omitted as information is already provided or not applicable - The item lists the Consolidated Financial Statements of Utz Brands, Inc. and the Reports of the Independent Registered Public Accounting Firm included in Part II, Item 8 of this Annual Report on Form 10-K[501](index=501&type=chunk)[502](index=502&type=chunk) - All financial statement schedules have been omitted because the information is not required, not applicable, or already included in the financial statements or their notes[503](index=503&type=chunk) - A comprehensive list of exhibits filed with the report is provided, including business combination agreements, certificates, warrant agreements, credit agreements, and compensation plans[505](index=505&type=chunk)[506](index=506&type=chunk)[508](index=508&type=chunk) [Form 10-K Summary](index=108&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is not applicable - No Form 10-K Summary is provided[509](index=509&type=chunk)

Financial Data and Key Metrics Changes - The company reported organic net sales growth of 3% and adjusted EBITDA growth of 9% in the third quarter [127][142] - Adjusted EBITDA margins expanded to 14%, the highest level in two years, driven by productivity programs and pricing strategies [142][150] - Adjusted net income increased by 9.5% and adjusted EPS rose by 9.2% to $0.17 per share [151] Business Line Data and Key Metrics Changes - Power Brands grew by 5%, with notable contributions from Utz Potato Chips, On the Border, Zappâs, and Boulder Canyon [127] - Foundation brands experienced a decline, particularly Golden Flake, which was impacted by supply chain disruptions and SKU rationalization efforts [128][135] - The company expects to see brand volume growth of nearly 3% when adjusted for SKU rationalization impacts [156] Market Data and Key Metrics Changes - The Salty Snack category growth is normalizing, with the company seeing a 6.5% increase in the potato chip segment, while its growth was slightly lower [82] - The company is experiencing channel shifts as consumers increasingly seek value, impacting sales across various segments [132][136] Company Strategy and Development Direction - The company is focused on optimizing its supply chain and portfolio, including reducing its plant network from 17 to 13 and insourcing volume from co-manufacturers [134][135] - There is a strong emphasis on expanding distribution in geographic areas such as the Midwest and Florida, as well as targeting unmeasured channels like dollar stores and discounters [90][91] - The company aims to enhance its marketing efforts for brands like Zappâs to capture more market share [44] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in the core markets but expressed optimism about the performance of Power Brands and expansion geographies [117][118] - The company is confident in its ability to navigate supply chain optimization without significant market share loss, supported by a robust expansion strategy [60] - Management highlighted the importance of household penetration as a key indicator of long-term success, with positive trends observed [141] Other Important Information - The company revised its organic net sales outlook to 3% to 4% growth, reflecting normalizing category trends and the impact of supply chain actions [155] - Adjusted gross margins expanded year-over-year by 40 basis points, driven by pricing and productivity programs [147] Q&A Session Summary Question: Can you elaborate on the supply chain optimization lessons learned? - Management noted the importance of understanding inventory safety stock levels and the need for trusted co-man partners for redundancy [137] Question: What is the impact of channel shifts on sales? - Management indicated that channel shifts are a smaller impact on overall business but represent an opportunity for growth in unmeasured channels [22] Question: How is the competitive environment characterized? - Management described the competitive environment as rational, with no significant changes in pricing or behavior observed [33] Question: What are the drivers behind Boulder Canyon's growth? - Management attributed Boulder Canyon's growth to consumer trends towards healthier options and strong acceptance in natural channels [40] Question: What is the status of SKU rationalization? - Management confirmed that SKU rationalization is nearing completion and will not materially impact results going forward [144][155]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Utz Brands, Inc. ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 1, 2023 (Exact name of registrant as specified in its charter) Delaware 001-38686 85-2751850 (State or other jurisdiction of incorporation) (Commission File ...

Utz Brands, Inc. Disclaimer Certain statements made herein are not historical facts but are "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, as amended. The forward-looking statements generally are accompanied by or include, without limitation, statements such as "will", "expect", "intends", "goal" or other similar words, phrases or expressions. These forward-looking statements include the expected effects from the COVID ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 2, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Utz Brands, Inc. (Exact name of registrant as specified in its charter) Delaware 001-38686 85-2751850 (State or other jurisdiction of incorporation) (Commission File Nu ...

Financial Data and Key Metrics Changes - Organic net sales increased by 4% year-over-year, despite a 21% comparable growth in the prior year [4][7] - Adjusted gross margins expanded by 50 basis points, or 140 basis points when accounting for IO route conversion impact [7][13] - Adjusted EBITDA increased nearly 11% to $40.4 million, representing 11.5% of net sales [7][13] - Adjusted EPS remained flat year-over-year at $0.11 [7][13] Business Line Data and Key Metrics Changes - The three largest brands, Utz, On The Border, and Zapp's, which represent about 75% of retail sales, collectively grew in double digits [8] - Utz brand grew by 11%, driven by potato chip growth of 18.5% [8] - On The Border tortilla chip retail sales increased by 4%, lapping 35% growth in the prior year [8] - Zapp's brand retail sales increased nearly 60%, driven by new flavored pretzel innovation and potato chip growth of 19.5% [9] Market Data and Key Metrics Changes - Retail sales increased by 9.4% versus the salty snack category growth of 14.8% [7] - Power brand consumption increased nearly 10% on top of 20% growth last year [4] - Total retail sales increased by 30% over a two-year basis, with power brands increasing by 32% [7] Company Strategy and Development Direction - The company is focused on extending the reach of its power brands and shifting marketing spend to drive consumer pull [6] - Strategic actions include SKU rationalization to improve margin mix and unlock manufacturing capacity [5][12] - The company plans to close its manufacturing operations in Birmingham, Alabama, to optimize its network [6][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's long-term growth prospects and the effectiveness of their strategies [20] - The company expects to drive organic net sales growth supported by the resilient salty snack category [12] - Management anticipates continued gross margin expansion and a reduction in balance sheet leverage [19] Other Important Information - The company reaffirmed its net sales growth outlook of 3% to 5% and increased its adjusted EBITDA growth outlook [18] - Capital expenditures for the year are expected to be between $50 million to $55 million, primarily for manufacturing capacity expansion [19] Q&A Session Summary Question: Strategic outlook for the summer period - Management noted that the competitive environment remains rational, with a strong portfolio of power brands that appeal to a broad consumer base [21][22] Question: SKU rationalization impact and inflation outlook - SKU rationalization is expected to deliver about 300 basis points for the year, with high single-digit inflation still anticipated [23] Question: Growth potential for Zapp's brand - Management is optimistic about Zapp's growth, citing strong consumer desirability and expansion opportunities [25] Question: Supply chain dynamics and in-sourcing opportunities - The Kings Mountain facility is expected to support increased capacity, with a balanced approach to co-manufacturing and in-sourcing [26] Question: Elasticity and adjusted EBITDA margins - Elasticities remain below historical levels, and the majority of EBITDA margin expansion is expected from gross margin improvements [27][29] Question: Dynamics in the tortilla chips category - Management expressed confidence in On The Border's growth potential, driven by distribution and merchandising efforts [31] Question: Performance of new sauce offerings - Salsa and Queso products are appealing to a broad audience, contributing to overall brand growth [34]