Utz Brands(UTZ) - 2023 Q4 - Annual Report

PART I Business Utz Brands, Inc. is a leading U.S. salty snack manufacturer, founded in 1921, producing a broad range of snacks distributed nationally 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] - 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] - Operates 14 manufacturing facilities and distributes nationally through direct shipments, distributors, and approximately 2,250 DSD routes[29] - Growth strategies include driving productivity, marketing and innovation investments, and strategic acquisitions[30] Recent Acquisitions and Dispositions 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] - During fiscal year 2022, the Company bought out and terminated contracts of multiple distributors, resulting in an expense of $23.0 million[31] - 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][33] - Post-closing of the Our Home™ transaction, the parties will operate under reciprocal co-manufacturing agreements[33] Recent Developments 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] - 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] 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] - 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] 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] - 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] - 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] 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] - 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] Product Innovation 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] - Zapp's Sinfully Seasoned Pretzel Stix achieved $20 million in retail sales and became a top 10 pretzel brand in its first year[44] - 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] - 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][47] Marketing, Advertising, and Consumer Engagement 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] - 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] Marketing and Advertising Expenses (FY2023) | Expense Category | Amount (in millions) | | :--------------------------------- | :------------------- | | Consumer Marketing and Advertising | $12.3 | | Cooperative Advertising | $29.8 | 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] - The company benefits from long-term relationships, averaging over 20 years with its top 15 retail customers[49] 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] - This domestic focus limits exposure to global economic conditions and foreign exchange fluctuations[50] 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] - 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] 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] Supply Chain 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] - 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] - Operates 10 company-operated manufacturing facilities with an annual capacity of approximately 500 million pounds of salty snacks (post-Our Home Transaction)[57] - Utilizes a flexible, scalable hybrid distribution system combining Direct-Store-Delivery (DSD), Direct-to-Warehouse (DTW), direct-to-consumer, and third-party distributors[58] - The DSD network includes approximately 2,250 routes, primarily managed by 2,200 independent operators (IOs), reaching over 83,000 retail stores[61] Food Safety and Quality 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] - Suppliers are required to have robust processes, and products undergo real-time testing and regular third-party laboratory verification[64] Human Capital 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][66] - A comprehensive diversity, equity, and inclusion strategy is underway, developed in partnership with a nationally recognized consulting firm[68] - 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][71][75] - As of December 31, 2023, the company employed approximately 3,400 full-time and 254 part-time associates[72] - 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] 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] - An ESG Committee was formed in 2020, and the 2022 ESG Report, outlining strategic priorities and progress, was released in August 2023[74][75] Intellectual Property 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] - It actively protects its intellectual property rights through various methods, including watch services and enforcement under intellectual property laws[77] - 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] 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] - Seasonal cash flow patterns include decreases in working capital levels in the fourth quarter and increases in the first quarter[81] Government Regulation and Compliance 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] - 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] - The company regularly monitors these regulatory requirements and its compliance[83] Available Information 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 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] - 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] - The company operates in the highly competitive snack food industry, facing competition from multinational, regional, local, and private label brands[98][103] - 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] - 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][118][120] - 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] - 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][195] - 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] Unresolved Staff Comments 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] Cybersecurity 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][222] - 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][224] - 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] - The Board of Directors, specifically the Audit Committee, oversees cybersecurity risks, receiving regular updates from the CIO on activities, strategies, and trends[226][227][228] Properties 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] - As of February 14, 2024, Utz Brands operated 10 principal manufacturing sites across the United States[231] - 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][233] - The properties are generally well-maintained and considered adequate for current and foreseeable business needs[233] Legal Proceedings 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] - Management does not believe the company is currently party to any material legal proceeding[234] Mine Safety Disclosures This item is not applicable - This item is not applicable[235] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 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] - 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] 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] Reserved This item is reserved and contains no information - This item is reserved[245] Management's Discussion and Analysis of Financial Condition and Results of Operations 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][264] - 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] - The company monitors long-term demographics, consumer trends, demand, operating costs, taxes, and financing costs, including exposure to interest rate changes[250][251][254][255][257] - Key developments affecting comparability include acquisitions and dispositions, commodity trends, and independent operator (IO) conversions[258][259][261] - The company uses non-GAAP financial measures, such as EBITDA and Adjusted EBITDA, to evaluate operating performance and facilitate comparisons[276][278] Overview 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] - Its portfolio of brands, including Utz®, ON THE BORDER®, Zapp's®, and Boulder Canyon®, reaches approximately 49% of U.S. households[249] - As of December 31, 2023, the company operates 14 manufacturing facilities and distributes products nationally through DSD routes, direct shipments, and distributors[249] - Based on 2023 retail sales, Utz Brands is the second-largest producer of branded salty snacks in its core geographies[249] Key Developments and Trends 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] - 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] 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] - 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] - 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] Recent Developments and Significant Items Affecting Comparability 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] - Distributor contract terminations resulted in expenses of $1.5 million for FY2023 and $23.0 million for FY2022[258] - Commodity costs, which increased significantly in FY2021 and FY2022, stabilized in FY2023, with the company using buying-forward and hedging to mitigate volatility[259] - 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] - 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] Results of Operations 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] - 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][271] - 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] - 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] - 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] Non-GAAP Financial Measures 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][279] - EBITDA is defined as Net Income before Interest, Income Taxes, and Depreciation and Amortization[278] - Adjusted EBITDA further excludes certain non-cash items, acquisition and integration costs, business transformation initiatives, and financing-related costs[278] 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][282][285] Liquidity and Capital Resources 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] - 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][404] 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] - The company was in compliance with its financial covenants for the Term Loan B and ABL facility as of December 31, 2023[289] - 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][287] Application of Critical Accounting Policies and Estimates 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] - Revenue recognition involves estimating variable consideration, including discounts, returns, allowances, and trade promotions, based on historical data[292][294] - Goodwill and other indefinite-lived intangible assets are tested for impairment at least annually, with the FY2023 qualitative analysis concluding no impairment[298][301] - 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][303] - Business combinations are evaluated to determine if they are asset acquisitions or business combinations, with acquired assets and liabilities recorded at fair value[306][307] Quantitative and Qualitative Disclosures About Market Risk 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] - 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] - 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] - 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] - 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] Financial Statements and Supplementary Data 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] - An unqualified opinion was also expressed on the effectiveness of the company's internal control over financial reporting as of December 31, 2023[316][324] - The financial statements include Consolidated Balance Sheets, Statements of Operations and Comprehensive Income (Loss), Statements of Equity, and Statements of Cash Flows[313] - Customer trade promotions associated with uncollected sales were identified as a critical audit matter due to uncertainty around settlement amount and timing[319][320] - Comprehensive Notes to Consolidated Financial Statements provide detailed disclosures on various accounting policies, financial instruments, and specific accounts[313] Consolidated Balance Sheets 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] - The allowance for accounts receivable increased from $1,815 thousand at January 1, 2023, to $2,933 thousand at December 31, 2023[332] Consolidated Statements of Operations And Comprehensive Income (Loss) 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] - Income tax expense was $0.8 million in FY2023, compared to an income tax benefit of $23.9 million in FY2022[334] - Other comprehensive loss was $13.5 million in FY2023, a shift from a gain of $47.3 million in FY2022[335] Consolidated Statements of Equity 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] - Share-based compensation increased additional paid-in capital by $17.1 million in FY2023[338] - Accumulated other comprehensive income decreased by $7.8 million attributable to controlling interest in FY2023[338] Consolidated Statements of Cash Flows 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] - 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] - 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] Notes to Consolidated Financial Statements 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][347] - Information on acquisitions includes Vitner's (2021), Festida Foods (2021), and R.W. Garcia (2021), detailing purchase prices and asset allocations[387][389][391] - Property, plant and equipment, net, decreased to $318.9 million at December 31, 2023, with details on impairments, facility closures, and sales[394][395][396][397] - 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][400] - 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][404] - The company uses interest rate swap agreements to manage interest rate risk and has outstanding purchase commitments for key ingredients[419][423] - Share-based compensation expense was $15.3 million in FY2023, with details on RSUs, PSUs, stock options, and the Employee Stock Purchase Plan[427] - Contingencies include partial guarantees on Independent Operator (IO) loans and the settlement of a Pennsylvania sales and use tax audit[447][448][449][446] - The Tax Receivable Agreement (TRA) liability was $24.3 million, with an additional $14.2 million unrecorded due to a valuation allowance[465] - 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][482] Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 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] Controls and Procedures 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] - Management concluded that internal control over financial reporting was effective as of December 31, 2023[487] - 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][324] - There were no material changes in the company's internal control over financial reporting during the most recent fiscal quarter[489] Other Information 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] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable - This item is not applicable[490] PART III Directors, Executive Officers and Corporate Governance 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][493] - Information on the Audit Committee and 'audit committee financial expert' status is incorporated by reference from the 2024 Proxy Statement[494] - Information regarding the Business Code of Conduct and Ethics is incorporated by reference from the 2024 Proxy Statement[495] Executive Compensation 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] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 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] - 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] Certain Relationships and Related Transactions, and Director Independence 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] Principal Accounting Fees and Services 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] PART IV Exhibits and Financial Statement Schedules 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][502] - 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] - A comprehensive list of exhibits filed with the report is provided, including business combination agreements, certificates, warrant agreements, credit agreements, and compensation plans[505][506][508] Form 10-K Summary This item is not applicable - No Form 10-K Summary is provided[509]