Utz Brands(US:UTZ)2022-08-11 11:51markdown [PART I – FINANCIAL INFORMATION](index=4&type=section&id=Part%20I%20-%20Financial%20Information) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents Utz Brands' unaudited consolidated financial statements, including balance sheets, operations, equity, and cash flows, with detailed notes [CONSOLIDATED BALANCE SHEETS](index=4&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) | Metric | July 3, 2022 (in thousands) | January 2, 2022 (in thousands) | | :----------------------------------- | :-------------------------- | :--------------------------- | | Total assets | $2,774,653 | $2,716,346 | | Total liabilities | $1,326,526 | $1,281,673 | | Total equity | $1,448,127 | $1,434,673 | | Cash and cash equivalents | $20,133 | $41,898 | | Accounts receivable, net | $152,061 | $131,388 | | Inventories | $99,545 | $79,517 | | Property, plant and equipment, net | $338,039 | $303,807 | | Goodwill | $915,490 | $915,438 | | Intangible assets, net | $1,120,154 | $1,142,509 | | Current portion of term debt | $14,255 | $11,414 | | Non-current portion of term debt and revolving credit facility | $877,066 | $830,548 | - Total assets increased by **$58.3 million**, from **$2.716 billion** as of **January 2, 2022**, to **$2.775 billion** as of **July 3, 2022**[17](index=17&type=chunk) - Cash and cash equivalents decreased by **$21.765 million**, from **$41.898 million** as of **January 2, 2022**, to **$20.133 million** as of **July 3, 2022**[17](index=17&type=chunk) [CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)](index=6&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20INCOME%20(LOSS)) | Metric (in thousands) | 13 Weeks Ended July 3, 2022 | 13 Weeks Ended July 4, 2021 | 26 Weeks Ended July 3, 2022 | 26 Weeks Ended July 4, 2021 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net sales | $350,147 | $297,919 | $690,914 | $567,101 | | Cost of goods sold | $238,618 | $202,359 | $475,578 | $376,300 | | Gross profit | $111,529 | $95,560 | $215,336 | $190,801 | | Income (loss) from operations | $5,292 | $4,369 | $(17,195) | $13,668 | | Net income (loss) | $2,545 | $16,179 | $(29,353) | $(7,170) | | Net income (loss) attributable to controlling interest | $3,179 | $17,579 | $(14,391) | $(4,950) | | Basic EPS | $0.04 | $0.22 | $(0.18) | $(0.07) | | Diluted EPS | $0.04 | $0.21 | $(0.18) | $(0.07) | - Net sales increased by **17.5%** for the thirteen weeks ended **July 3, 2022**, to **$350.1 million**, and by **21.8%** for the twenty-six weeks ended **July 3, 2022**, to **$690.9 million**, compared to the respective prior year periods[22](index=22&type=chunk)[142](index=142&type=chunk)[152](index=152&type=chunk) - The Company reported a net loss of **$(29.353) million** for the twenty-six weeks ended **July 3, 2022**, a significant decrease from a net loss of **$(7.170) million** in the prior year period[22](index=22&type=chunk) [CONSOLIDATED STATEMENTS OF EQUITY](index=7&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20EQUITY) | Metric (in thousands) | Balance at January 2, 2022 | Balance at July 3, 2022 | | :-------------------------------- | :------------------------- | :---------------------- | | Total Stockholders' Equity | $679,705 | $701,284 | | Noncontrolling Interest | $754,968 | $746,843 | | Total Equity | $1,434,673 | $1,448,127 | | Accumulated Deficit | $(236,598) | $(259,593) | | Accumulated Other Comprehensive Income | $3,715 | $21,288 | - Total equity increased from **$1.435 billion** as of **January 2, 2022**, to **$1.448 billion** as of **July 3, 2022**[24](index=24&type=chunk) - Accumulated deficit increased from **$(236.598) million** to **$(259.593) million**, reflecting net losses during the period[24](index=24&type=chunk) [CONSOLIDATED STATEMENTS OF CASH FLOWS](index=9&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) | Cash Flow Activity (in thousands) | 26 Weeks Ended July 3, 2022 | 26 Weeks Ended July 4, 2021 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Net cash used in operating activities | $(26,268) | $(44) | | Net cash used in investing activities | $(47,251) | $(70,543) | | Net cash provided by financing activities | $51,754 | $50,501 | | Net decrease in cash and cash equivalents | $(21,765) | $(20,086) | | Cash and cash equivalents at end of period | $20,133 | $26,745 | - Net cash used in operating activities significantly increased to **$(26.268) million** for the twenty-six weeks ended **July 3, 2022**, compared to **$(0.044) million** in the prior year, primarily due to distributor buyouts and inventory build-up[28](index=28&type=chunk)[168](index=168&type=chunk) - Net cash provided by financing activities increased to **$51.754 million**, driven by increased line of credit borrowings, equipment loans, and proceeds from share issuance[28](index=28&type=chunk)[168](index=168&type=chunk) [NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS](index=10&type=section&id=NOTES%20TO%20THE%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) [1. OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=10&type=section&id=1.%20OPERATIONS%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) - The Company, through its subsidiary Utz Quality Foods, LLC, is a premier producer, marketer, and distributor of snack food products since **1921**, selling a full line of salty snack items across most regions of the United States[33](index=33&type=chunk) - The Company reclassified 'gain on disposal of property, plant and equipment, net' and 'gain on sale of routes, net' into a single line item 'gain on sale of assets' for simplified reporting, with no impact on total operating costs, earnings, or equity[32](index=32&type=chunk) - The Company recorded an expense of **$23.0 million** for the twenty-six weeks ended **July 3, 2022**, due to the buyout and termination of contracts with multiple third-party distributors, included in selling and distribution expense[53](index=53&type=chunk) [2. ACQUISITIONS](index=13&type=section&id=2.%20ACQUISITIONS) - On **February 8, 2021**, the Company acquired certain assets of the C.J. Vitner business for approximately **$25.2 million**, funded from cash-on-hand, allocating **$17.9 million** to goodwill[57](index=57&type=chunk) - On **June 7, 2021**, the Company acquired Festida Foods for approximately **$40.3 million**, funded partly by incremental financing, allocating **$11.6 million** to goodwill[58](index=58&type=chunk)[59](index=59&type=chunk) - On **December 6, 2021**, the Company acquired RW Garcia for approximately **$57.8 million**, funded partly by a line of credit draw and cash, allocating **$25.969 million** to goodwill[60](index=60&type=chunk)[61](index=61&type=chunk) [3. INVENTORIES](index=15&type=section&id=3.%20INVENTORIES) | Inventory Type (in thousands) | July 3, 2022 | January 2, 2022 | | :---------------------------- | :----------- | :-------------- | | Finished goods | $55,652 | $43,533 | | Raw materials | $36,613 | $29,428 | | Maintenance parts | $7,280 | $6,556 | | Total inventories | $99,545 | $79,517 | - Total inventories increased by **$20.028 million**, from **$79.517 million** as of **January 2, 2022**, to **$99.545 million** as of **July 3, 2022**[28](index=28&type=chunk)[62](index=62&type=chunk) [4. PROPERTY, PLANT AND EQUIPMENT, NET](index=16&type=section&id=4.%20PROPERTY,%20PLANT%20AND%20EQUIPMENT,%20NET) | PP&E Category (in thousands) | July 3, 2022 | January 2, 2022 | | :--------------------------- | :----------- | :-------------- | | Land | $29,160 | $25,886 | | Buildings | $103,140 | $98,664 | | Machinery and equipment | $216,030 | $214,319 | | Construction-in-progress | $62,008 | $13,745 | | Total PP&E, net | $338,039 | $303,807 | - Property, plant and equipment, net, increased by **$34.232 million**, from **$303.807 million** as of **January 2, 2022**, to **$338.039 million** as of **July 3, 2022**[63](index=63&type=chunk) - The Company purchased a new snack food manufacturing facility in Kings Mountain, North Carolina, for approximately **$38.4 million** on **April 28, 2022**[63](index=63&type=chunk) [5. GOODWILL AND INTANGIBLE ASSETS, NET](index=16&type=section&id=5.%20GOODWILL%20AND%20INTANGIBLE%20ASSETS,%20NET) | Intangible Asset (in thousands) | July 3, 2022 | January 2, 2022 | | :------------------------------ | :----------- | :-------------- | | Goodwill | $915,490 | $915,438 | | Amortizable assets, net | $677,877 | $698,820 | | Non-amortizable assets (Trade names, Route assets) | $442,277 | $443,689 | | Total Intangible assets, net | $1,120,154 | $1,142,509 | - Goodwill increased slightly by **$0.052 million** due to an RW Garcia acquisition adjustment, reaching **$915.490 million** as of **July 3, 2022**[65](index=65&type=chunk) - The Company recorded an impairment expense of **$2.0 million** related to the termination of master distribution rights during the first fiscal quarter of **2022**[66](index=66&type=chunk) [6. NOTES RECEIVABLE](index=17&type=section&id=6.%20NOTES%20RECEIVABLE) | Notes Receivable (in thousands) | July 3, 2022 | January 2, 2022 | | :------------------------------ | :----------- | :-------------- | | Notes receivable from IOs | $25,600 | $27,200 | | Other notes receivable | $200 | $200 | | Total notes receivable | $25,800 | $27,400 | - Notes receivable from independent operators (IOs) decreased from **$27.2 million** to **$25.6 million**, collateralized by the routes[68](index=68&type=chunk) [7. ACCRUED EXPENSES AND OTHER](index=18&type=section&id=7.%20ACCRUED%20EXPENSES%20AND%20OTHER) | Accrued Expense Category (in thousands) | July 3, 2022 | January 2, 2022 | | :-------------------------------------- | :----------- | :-------------- | | Total current accrued expenses and other | $65,819 | $71,280 | | Total non-current accrued expenses and other | $61,714 | $55,838 | | Tax Receivable Agreement liability (non-current) | $25,426 | $24,443 | - Current accrued expenses and other decreased by **$5.461 million**, while non-current accrued expenses and other increased by **$5.876 million**[70](index=70&type=chunk) [8. LONG-TERM DEBT](index=18&type=section&id=8.%20LONG-TERM%20DEBT) | Debt Type (in thousands) | July 3, 2022 | January 2, 2022 | | :----------------------- | :----------- | :-------------- | | Term loan B | $783,261 | $787,236 | | Equipment loans | $49,747 | $26,655 | | ABL facility | $65,824 | $36,000 | | Total long-term debt | $891,321 | $841,962 | | Current portion of term debt | $14,255 | $11,414 | | Non-current portion of term debt and revolving credit facility | $877,066 | $830,548 | | Note payable – IO notes | $24,736 | $24,822 | | Capital lease | $7,876 | $8,166 | | Total notes payable | $37,329 | $34,666 | - Total long-term debt increased by **$49.359 million** to **$891.321 million** as of **July 3, 2022**, primarily due to increased equipment loans and ABL facility draws[71](index=71&type=chunk)[77](index=77&type=chunk)[176](index=176&type=chunk) - Interest expense for the twenty-six weeks ended **July 3, 2022**, was **$19.830 million**, up from **$18.757 million** in the prior year, driven by additional equipment loan draws and higher interest rates[82](index=82&type=chunk)[159](index=159&type=chunk) [9. DERIVATIVE FINANCIAL INSTRUMENTS AND PURCHASE COMMITMENTS](index=20&type=section&id=9.%20DERIVATIVE%20FINANCIAL%20INSTRUMENTS%20AND%20PURCHASE%20COMMITMENTS) - The Company uses interest rate swap contracts to hedge against interest rate fluctuations, with a notional amount accreting to **$500 million** and maturing on **September 30, 2026**[83](index=83&type=chunk) - A gain on remeasurement of warrant liability of **$5.760 million** was recognized for the thirteen weeks ended **July 3, 2022**, and **$7.704 million** for the twenty-six weeks ended **July 3, 2022**[85](index=85&type=chunk)[110](index=110&type=chunk) - Outstanding purchase commitments for key ingredients totaled **$93.2 million** as of **July 3, 2022**, with recorded losses of **$1.0 million** for the twenty-six weeks ended **July 3, 2022**[86](index=86&type=chunk) [10. FAIR VALUE MEASUREMENTS](index=21&type=section&id=10.%20FAIR%20VALUE%20MEASUREMENTS) | Financial Instrument (in thousands) | July 3, 2022 (Level II) | January 2, 2022 (Level II) | | :---------------------------------- | :---------------------- | :------------------------- | | Interest rate swaps (assets) | $28,497 | $2,208 | | Commodity contracts (liabilities) | $1,510 | $54 | | Private placement warrants (liabilities) | $38,520 | $46,224 | | Debt (liabilities) | $891,321 | $841,962 | - The fair value of interest rate swaps (assets) significantly increased from **$2.208 million** to **$28.497 million**, while private placement warrants (liabilities) decreased from **$46.224 million** to **$38.520 million**[90](index=90&type=chunk) [11. CONTINGENCIES](index=22&type=section&id=11.%20CONTINGENCIES) - The Company settled a sales and use tax audit with the Commonwealth of Pennsylvania for **$0.9 million** on **January 7, 2022**[92](index=92&type=chunk) - The Company partially guarantees loans made to IOs by Cadence Bank (**$1.8 million** outstanding) and Bank of America (**$28.6 million** outstanding off-balance sheet), with a maximum guarantee of **25%** of the outstanding loan balance[93](index=93&type=chunk)[94](index=94&type=chunk) - Loans guaranteed to IOs by M&T Bank totaled **$4.1 million** as of **July 3, 2022**, included on the consolidated balance sheets[96](index=96&type=chunk) [12. ACCUMULATED OTHER COMPREHENSIVE INCOME](index=23&type=section&id=12.%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20INCOME) | Metric (in thousands) | July 3, 2022 | January 2, 2022 | | :-------------------------------------- | :----------- | :-------------- | | Total accumulated other comprehensive income | $34,535 | $3,715 | | Balance attributable to controlling interest | $21,288 | $3,715 | | Unrealized gain on cash flow hedges (26 weeks) | $30,820 | $1,429 | - Total accumulated other comprehensive income increased significantly from **$3.7 million** as of **January 2, 2022**, to **$34.5 million** as of **July 3, 2022**, primarily due to unrealized gains from cash flow hedges[97](index=97&type=chunk) [13. SUPPLEMENTARY CASH FLOW INFORMATION](index=23&type=section&id=13.%20SUPPLEMENTARY%20CASH%20FLOW%20INFORMATION) | Metric (in thousands) | 26 Weeks Ended July 3, 2022 | 26 Weeks Ended July 4, 2021 | | :-------------------- | :-------------------------- | :-------------------------- | | Cash paid for interest | $18,515 | $17,391 | | Refunds related to income taxes | $4,562 | $182 | | Payments for income taxes | $2,475 | $3,116 | | Dividends accrued | $4,360 | $3,826 | - Cash paid for interest increased to **$18.515 million** for the twenty-six weeks ended **July 3, 2022**, from **$17.391 million** in the prior year[98](index=98&type=chunk) - Income tax refunds significantly increased to **$4.562 million**, while payments for income taxes decreased to **$2.475 million**[98](index=98&type=chunk) [14. INCOME TAXES](index=24&type=section&id=14.%20INCOME%20TAXES) | Metric | 13 Weeks Ended July 3, 2022 | 13 Weeks Ended July 4, 2021 | 26 Weeks Ended July 3, 2022 | 26 Weeks Ended July 4, 2021 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Income tax (benefit) expense (in millions) | $(2.9) | $0.4 | $(0.1) | $1.4 | | Effective tax rate | 894.8% | 2.5% | 0.3% | (24.8)% | | Effective tax rate (before discrete items) | 9.5% | N/A | (5.0)% | N/A | - The Company recorded an income tax benefit of **$(2.9) million** for the thirteen weeks and **$(0.1) million** for the twenty-six weeks ended **July 3, 2022**, compared to income tax expense in the prior year periods[100](index=100&type=chunk) - The effective tax rates were significantly impacted by the partnership structure of UBH, state taxes, warrant liabilities, and a discrete tax benefit of **$(2.4) million** for the thirteen weeks and **$(1.9) million** for the twenty-six weeks ended **July 3, 2022**, due to updated state nexus and apportionment estimates[100](index=100&type=chunk) [15. WARRANTS](index=25&type=section&id=15.%20WARRANTS) - As of **July 3, 2022**, there were **7,200,000** Private Placement Warrants outstanding, which are accounted for as derivative liabilities at fair value[107](index=107&type=chunk)[109](index=109&type=chunk) - The remeasurement of the warrant liability resulted in a gain of **$5.8 million** for the thirteen weeks and **$7.7 million** for the twenty-six weeks ended **July 3, 2022**[110](index=110&type=chunk) [16. BUSINESS RISK](index=26&type=section&id=16.%20BUSINESS%20RISK) - The Company continues to experience higher demand for its products and has increased production and distribution activities in response to the COVID-19 pandemic[111](index=111&type=chunk) - Significant inflationary pressures on input and supply chain costs have led the Company to implement pricing actions[111](index=111&type=chunk) [17. EQUITY](index=26&type=section&id=17.%20EQUITY) | Stock Class | Shares Authorized | Shares Issued and Outstanding (July 3, 2022) | Shares Issued and Outstanding (January 2, 2022) | | :-------------------------- | :---------------- | :------------------------------------------- | :-------------------------------------------- | | Class A Common Stock | 1,000,000,000 | 80,812,835 | 77,644,645 | | Class V Common Stock | 61,249,000 | 59,349,000 | 59,349,000 | - The number of Class A Common Stock shares issued and outstanding increased from **77,644,645** to **80,812,835** between **January 2, 2022**, and **July 3, 2022**[112](index=112&type=chunk) [18. EARNINGS (LOSS) PER SHARE](index=26&type=section&id=18.%20EARNINGS%20(LOSS)%20PER%20SHARE) | EPS Metric | 13 Weeks Ended July 3, 2022 | 13 Weeks Ended July 4, 2021 | 26 Weeks Ended July 3, 2022 | 26 Weeks Ended July 4, 2021 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Basic EPS | $0.04 | $0.22 | $(0.18) | $(0.07) | | Diluted EPS | $0.04 | $0.21 | $(0.18) | $(0.07) | | Weighted average Class A Common Stock shares, basic | 80,171,174 | 76,500,488 | 79,371,789 | 76,213,746 | | Diluted weighted average shares (13 weeks) | 81,510,936 | 81,732,056 | N/A | N/A | | Anti-dilutive securities excluded (26 weeks) | N/A | N/A | 1,691,247 | 5,677,087 | - Basic and diluted EPS for the twenty-six weeks ended **July 3, 2022**, was **$(0.18)**, reflecting a net loss attributable to controlling interest of **$(14.391) million**[119](index=119&type=chunk) - Anti-dilutive securities, including warrants, RSUs, PSUs, and stock options, were excluded from the diluted EPS calculation for the twenty-six weeks ended **July 3, 2022**[119](index=119&type=chunk) [19. SUBSEQUENT EVENTS](index=29&type=section&id=19.%20SUBSEQUENT%20EVENTS) - The Company reviewed events subsequent to the balance sheet date and found no events requiring recognition or disclosure[121](index=121&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition and results of operations, highlighting key developments, trends, and significant items affecting comparability [Overview](index=29&type=section&id=Overview) - Utz Brands, Inc. is a leading U.S. manufacturer of branded salty snacks, with a portfolio of iconic brands and a national distribution network, founded in **1921**[124](index=124&type=chunk) - The Company is the second-largest producer of branded salty snacks in its core geographies based on **2021** retail sales[124](index=124&type=chunk) [Key Developments and Trends](index=30&type=section&id=Key%20Developments%20and%20Trends) - The U.S. salty snacks category is attractive and growing, with retail sales increasing at approximately a **7.1%** compound annual growth rate from **2018** through **2021**[126](index=126&type=chunk) - For the thirteen weeks ended **July 3, 2022**, U.S. retail sales for salty snacks increased by **14.8%**, and the Company's retail sales increased by **16.0%** year-over-year[127](index=127&type=chunk) - The Company's weighted average interest rate for the twenty-six weeks ended **July 3, 2022**, was **4.1%**, up from **3.7%** in the prior year, with **$849.1 million** in variable rate indebtedness[131](index=131&type=chunk)[132](index=132&type=chunk) [Recent Developments and Significant Items Affecting Comparability](index=31&type=section&id=Recent%20Developments%20and%20Significant%20Items%20Affecting%20Comparability) - The Company completed three acquisitions in **2021**: Vitner's (**$25.2 million**), Festida Foods (**$40.3 million**), and RW Garcia (**$57.8 million**), expanding its product offering and distribution[134](index=134&type=chunk)[135](index=135&type=chunk)[136](index=136&type=chunk) - The Company expects gross input cost inflation (commodities, labor, transportation) to be in the **mid to high-teens** in fiscal **2022**, which it aims to offset through efficiencies and price increases[137](index=137&type=chunk) - The mix of Independent Operators (IOs) in the DSD distribution network increased to approximately **91%** as of **July 3, 2022**, from **83%** as of **July 4, 2021**, with substantially all remaining conversions anticipated by the end of fiscal year **2022**[139](index=139&type=chunk) [Results of Operations](index=33&type=section&id=Results%20of%20Operations) | Metric (in millions) | 13 Weeks Ended July 3, 2022 | 13 Weeks Ended July 4, 2021 | 26 Weeks Ended July 3, 2022 | 26 Weeks Ended July 4, 2021 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net sales | $350.1 | $297.9 | $690.9 | $567.1 | | Gross profit | $111.5 | $95.6 | $215.3 | $190.8 | | Gross profit margin | 31.9% | 32.1% | 31.2% | 33.6% | | Selling, distribution, and administrative expenses | $107.6 | $93.5 | $234.3 | $180.1 | | Income (loss) from operations | $5.3 | $4.4 | $(17.2) | $13.7 | | Net income (loss) | $2.5 | $16.2 | $(29.4) | $(7.2) | | Adjusted EBITDA | $42.2 | $35.7 | $78.7 | $73.7 | | Adjusted EBITDA as a % of Net Sales | 12.1% | 12.0% | 11.4% | 13.0% | - Net sales increased by **17.5%** (13 weeks) and **21.8%** (26 weeks) year-over-year, primarily due to favorable price/mix (**13.0%** and **11.3%** respectively) and acquisitions[142](index=142&type=chunk)[152](index=152&type=chunk) - Gross profit margin declined to **31.9%** (13 weeks) and **31.2%** (26 weeks) due to commodity and wage inflation, and higher depreciation, partially offset by pricing and productivity actions[147](index=147&type=chunk)[156](index=156&type=chunk) - Selling, distribution, and administrative expenses increased by **$54.1 million** for the twenty-six weeks ended **July 3, 2022**, largely due to **$23.0 million** in distributor buyout costs and higher delivery costs[157](index=157&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) | Cash Flow Activity (in thousands) | 26 Weeks Ended July 3, 2022 | 26 Weeks Ended July 4, 2021 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Net cash used in operating activities | $(26,268) | $(44) | | Net cash used in investing activities | $(47,251) | $(70,543) | | Net cash provided by financing activities | $51,754 | $50,501 | | Net decrease in cash and cash equivalents | $(21,765) | $(20,086) | | Cash and cash equivalents at end of period | $20,133 | $26,745 | - Net cash used in operating activities increased significantly to **$(26.3) million** for the twenty-six weeks ended **July 3, 2022**, primarily due to **$20.2 million** in distributor buyout payments and increased inventory[168](index=168&type=chunk) - Net cash provided by financing activities was **$51.8 million**, driven by a **$29.8 million** increase in the line of credit, **$28.9 million** in equipment loan borrowings, and **$28.0 million** from share issuance[168](index=168&type=chunk) - As of **July 3, 2022**, **$65.8 million** was outstanding under the ABL facility, with **$82.8 million** available for borrowing[170](index=170&type=chunk) [Off-Balance Sheet Arrangements](index=41&type=section&id=Off-Balance%20Sheet%20Arrangements) - The Company had **$93.2 million** in outstanding purchase commitments for key ingredients as of **July 3, 2022**, and recorded **$1.0 million** in purchase commitment losses for the twenty-six weeks ended **July 3, 2022**[182](index=182&type=chunk) - The Company partially guarantees IO loans from Cadence Bank (**$1.8 million** outstanding) and Bank of America (**$28.6 million** outstanding), which are off-balance sheet arrangements[183](index=183&type=chunk)[184](index=184&type=chunk) [New Accounting Pronouncements](index=42&type=section&id=New%20Accounting%20Pronouncements) - The Company is evaluating the impact of ASU No. **2020-04** (Reference Rate Reform) and ASU No. **2016-13** (Credit Losses) on its financial statements, with the latter effective in **2023**[55](index=55&type=chunk)[56](index=56&type=chunk) [Application of Critical Accounting Policies and Estimates](index=42&type=section&id=Application%20of%20Critical%20Accounting%20Policies%20and%20Estimates) - Revenue recognition involves significant management judgment for variable consideration, including discounts, returns, and trade promotions, with reserves of **$33.0 million** as of **July 3, 2022**[50](index=50&type=chunk)[190](index=190&type=chunk) - The Company tests goodwill and indefinite-lived intangible assets for impairment at least annually, with no quantitative impairment test deemed necessary through **July 3, 2022**, based on qualitative assessment[194](index=194&type=chunk)[197](index=197&type=chunk) - Income tax accounting requires estimates for current and deferred tax assets/liabilities, with a valuation allowance recorded against certain deferred tax assets due to uncertainty of future realization[101](index=101&type=chunk)[198](index=198&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=45&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 market risk disclosures, noting no material changes since **January 2, 2022** - The Company's exposures to market risk have not materially changed since **January 2, 2022**, as detailed in its Annual Report on Form **10-K**[204](index=204&type=chunk) [Item 4. Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the Company's disclosure controls and procedures and reports no material changes in internal control over financial reporting - 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 as of **July 3, 2022**[205](index=205&type=chunk) - There were no material changes in the Company's internal control over financial reporting during the most recent fiscal quarter[206](index=206&type=chunk) [PART II – OTHER INFORMATION](index=45&type=section&id=Part%20II%20-%20Other%20Information) [Item 1. Legal Proceedings](index=45&type=section&id=Item%201.%20Legal%20Proceedings) This section states that the Company is involved in routine litigation but does not expect any currently pending legal proceedings to have a material adverse effect on its business or financial condition - The Company is involved in litigation incidental to its business, but management does not believe any currently pending legal proceeding will have a material adverse effect on its financial condition, results of operations, or cash flows[207](index=207&type=chunk) [Item 1A. Risk Factors](index=46&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the risk factors detailed in the Company's Annual Report on Form 10-K, confirming that no material changes have occurred since its filing - There have been no material changes to the Company's risk factors since the filing of its Annual Report on Form **10-K** on **March 3, 2022**[208](index=208&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=46&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 - There were no unregistered sales of equity securities or use of proceeds to report[209](index=209&type=chunk) [Item 3. Defaults Upon Senior Securities](index=46&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section indicates that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities to report[210](index=210&type=chunk) [Item 4. Mine Safety Disclosures](index=46&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that there are no mine safety disclosures required for the Company - There are no mine safety disclosures to report[211](index=211&type=chunk) [Item 5. Other Information](index=46&type=section&id=Item%205.%20Other%20Information) This section indicates that there is no other information to report - There is no other information to report[212](index=212&type=chunk) [Item 6. Exhibits](index=46&type=section&id=Item%206.%20Exhibits) This section lists the exhibits furnished as part of the report, including organizational documents, incentive plans, certifications, and XBRL taxonomy documents - The report includes various exhibits such as the Certificate of Incorporation, Bylaws, **2020** Omnibus Equity Incentive Plan, CEO/CFO certifications, and Inline XBRL documents[215](index=215&type=chunk) [Signatures](index=46&type=section&id=Signatures) This section contains the official signatures, confirming the due authorization and filing of the report - The report was duly signed on **August 11, 2022**, by Ajay Kataria, Executive Vice President, Chief Financial Officer of Utz Brands, Inc[219](index=219&type=chunk)