utz-20240331

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 March 31, 2024
			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 Number)

(IRS Employer
Identification No.)

900 High Street

Hanover, PA 17331

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (717) 637-6644

N/A

(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, par value $0.0001 per share

UTZ

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻

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



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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ⌧

As of April 29, 2024, 81,473,973 Class A Common Stock, par value $0.0001 per share, and 59,349,000 shares of Class V Common Stock, par value $0.0001 per share, were issued and outstanding.

INTRODUCTORY NOTE

On August 28, 2020 (the "Closing Date"), Utz Brands, Inc. (formerly Collier Creek Holdings), consummated a business combination (the "Business Combination") with Utz Brands Holdings, LLC ("UBH") pursuant to the terms of the Business Combination Agreement, dated as of June 5, 2020 (the "Business Combination Agreement"), entered into by and among the Company, UBH, and Series U of UM Partners, LLC ("Series U") and Series R of UM Partners, LLC ("Series R" and together with Series U, the "Continuing Members"). Additional information about the Business Combination can be found in our Annual Report on Form 10-K for the year ended December 31, 2023.

Throughout this Quarterly Report on Form 10-Q, unless otherwise noted the "Company", "we", "us", "our", "UBI" and "Utz" refer to Utz Brands, Inc. and its consolidated subsidiaries.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to expectations for future financial performance, business strategies or expectations for the Company’s business. Specifically, forward-looking statements may include statements relating to:

•The financial position, capital structure, indebtedness, business strategy and plans and objectives of management for future operations;

•The benefits of the Company's acquisitions, dispositions and similar transactions;

•The likelihood of the Company completing contemplated acquisitions, dispositions and similar transactions;

•The future performance of, and anticipated financial impact on, the Company;

•Expansion plans and opportunities;

•Cost savings plans and network optimization strategies;

•Transformation of the Company’s supply chain; and

•Other statements preceded by, followed by or that include the words “may,” “can,” “should,” “will,” “estimate,” “plan,” “project,” "forecast,” "intend,” "expect,” “anticipate,” “believe,” “seek,” "target” or similar expressions.

These forward-looking statements are based on information available as of the date of this Quarterly Report on Form 10-Q and the Company management’s current expectations, forecasts and assumptions, and involve a number of judgments, known and unknown risks and uncertainties and other factors, many of which are outside the control of the Company and its directors, officers and affiliates. Accordingly, forward-looking statements should not be relied upon as representing the Company’s views as of any subsequent date. The Company does not undertake any obligation to update, add or to otherwise correct any forward-looking statements contained herein to reflect events or circumstances after the date they were made, whether as a result of new information, future events, inaccuracies that become apparent after the date hereof or otherwise, except as may be required under applicable securities laws.

As a result of a number of known and unknown risks and uncertainties, the Company’s results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ are described under Part I, Item 1A "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2023. There have been no material changes to our risk factors since the filing of the Annual Report on Form 10-K for the year ended December 31, 2023.


Table of Contents

			Page
Part I - Financial Information
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS			1
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)			2
CONSOLIDATED STATEMENTS OF EQUITY			3
CONSOLIDATED STATEMENTS OF CASH FLOWS			4
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS			5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			16
Item 3. Quantitative and Qualitative Disclosures About Market Risk			24
Item 4. Controls and Procedures			24

Part II - Other Information
Item 1. Legal Proceedings			24
Item 1A. Risk Factors			24
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			24
Item 3. Defaults Upon Senior Securities			24
Item 4. Mine Safety Disclosures			24
Item 5. Other Information			24
Item 6. Exhibits			25
Signatures			26

PART I – FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

Utz Brands, Inc.

CONSOLIDATED BALANCE SHEETS

March 31, 2024 and December 31, 2023

(In thousands, except share information)


	As of March 31, 2024		As of December 31, 2023
	(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	47,004	$	52,023
Accounts receivable, less allowance of $3,103 and $2,933, respectively	135,227		135,130
Inventories	104,586		104,666
Prepaid expenses and other assets	36,978		30,997
Current portion of notes receivable	4,987		5,237
Total current assets	328,782		328,053
Non-current Assets
Assets held for sale	3,253		7,559
Property, plant and equipment, net	295,836		318,881
Goodwill	870,695		915,295
Intangible assets, net	1,011,237		1,063,413
Non-current portion of notes receivable	11,477		12,413
Other assets	103,972		101,122
Total non-current assets	2,296,470		2,418,683
Total assets	$	2,625,252	$	2,746,736
LIABILITIES AND EQUITY
Current Liabilities
Current portion of term debt	$	20,651	$	21,086
Current portion of other notes payable	7,696		7,649
Accounts payable	115,651		124,361
Accrued expenses and other	91,278		77,590
Total current liabilities	235,276		230,686
Non-current portion of term debt and revolving credit facility	736,246		878,511
Non-current portion of other notes payable	19,086		19,174
Non-current accrued expenses and other	73,691		76,720
Non-current warrant liability	55,080		43,272
Deferred tax liability	115,785		114,690
Total non-current liabilities	999,888		1,132,367
Total liabilities	1,235,164		1,363,053
Commitments and Contingencies
Equity
Shares of Class A Common Stock, $0.0001 par value; 1,000,000,000 shares authorized; 81,406,827 and 81,187,977 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively	8		8
Shares of Class V Common Stock, $0.0001 par value; 61,249,000 shares authorized; 59,349,000 shares issued and outstanding as of March 31, 2024 and December 31, 2023	6		6
Additional paid-in capital	952,227		944,573
Accumulated deficit	(306,842)		(298,049)
Accumulated other comprehensive income	25,652		22,958
Total stockholders' equity	671,051		669,496
Noncontrolling interest	719,037		714,187
Total equity	1,390,088		1,383,683
Total liabilities and equity	$	2,625,252	$	2,746,736

The accompanying notes are an integral part of these consolidated financial statements.

Utz Brands, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the thirteen weeks ended March 31, 2024 and April 2, 2023

(In thousands, except share information)

(Unaudited)


	Thirteen weeks ended March 31, 2024		Thirteen weeks ended April 2, 2023
Net sales	$	346,523	$	351,433
Cost of goods sold	226,950		246,937
Gross profit	119,573		104,496

Selling, distribution, and administrative expenses
Selling and distribution	73,666		65,046
Administrative	35,782		41,040
Total selling, distribution, and administrative expenses	109,448		106,086

Loss on sale of assets, net	(470)		(508)

Income (loss) from operations	9,655		(2,098)

Other income (expense), net
Gain on sale of business	44,015		—
Interest expense	(13,831)		(14,378)
Other income	910		1,615
Loss on remeasurement of warrant liability	(11,808)		(2,232)
Other income (expense), net	19,286		(14,995)

Income (loss) before taxes	28,941		(17,093)
Income tax expense (benefit)	26,544		(2,611)
Net income (loss)	2,397		(14,482)

Net (income) loss attributable to noncontrolling interest	(6,387)		5,355
Net loss attributable to controlling interest	$	(3,990)	$	(9,127)

Loss per Class A Common stock: (in dollars)
Basic	$	(0.05)	$	(0.11)
Diluted	$	(0.05)	$	(0.11)

Weighted-average shares of Class A Common stock outstanding
Basic	81,389,465		80,978,008
Diluted	81,389,465		80,978,008

Net income (loss)	$	2,397	$	(14,482)
Other comprehensive income (loss):
Change in fair value of interest rate swap	4,659		(10,325)
Comprehensive income (loss)	7,056		(24,807)
Net comprehensive (income) loss attributable to noncontrolling interest	(8,352)		9,722
Net comprehensive loss attributable to controlling interest	$	(1,296)	$	(15,085)

The accompanying notes are an integral part of these consolidated financial statements.

Utz Brands, Inc.

CONSOLIDATED STATEMENTS OF EQUITY

For the thirteen weeks ended March 31, 2024 and April 2, 2023

(In thousands, except share information)

(Unaudited)


	Class A Common Stock			Class V Common Stock			Additional Paid-in Capital		Accumulated (Deficit)		Accumulated Other Comprehensive Income		Total Stockholders' Equity		Non-controlling Interest		Total Equity
	Shares	Amount		Shares	Amount
Balance at January 1, 2023	80,882,334	$	8	59,349,000	$	6	$	926,919	$	(254,564)	$	30,777	$	703,146	$	748,538	$	1,451,684
Share-based compensation	130,534	—			—		4,634		—		—		4,634		—		4,634
Payments of tax withholding requirements for employee stock awards		—			—		(589)		—		—		(589)		—		(589)
Net loss		—			—		—		(9,127)		—		(9,127)		(5,355)		(14,482)
Cash dividends declared		—			—		—		(56)		—		(56)		—		(56)
Other comprehensive loss		—			—		—		—		(5,958)		(5,958)		(4,367)		(10,325)
Balance at April 2, 2023	81,012,868	$	8	59,349,000	$	6	$	930,964	$	(263,747)	$	24,819	$	692,050	$	738,816	$	1,430,866

Balance at December 31, 2023	81,187,977	$	8	59,349,000	$	6	$	944,573	$	(298,049)	$	22,958	$	669,496	$	714,187	$	1,383,683
Share-based compensation	218,850	—			—		3,913		—		—		3,913		—		3,913
Payments of tax withholding requirements for employee stock awards		—			—		(1,397)		—		—		(1,397)		—		(1,397)
Deferred tax impact from divestiture		—			—		5,138		—		—		5,138		—		5,138
Net (loss) income		—			—		—		(3,990)		—		(3,990)		6,387		2,397
Cash dividends declared		—			—		—		(4,803)		—		(4,803)		—		(4,803)
Distribution to noncontrolling interest		—			—		—		—		—		—		(3,502)		(3,502)
Other comprehensive income		—			—		—		—		2,694		2,694		1,965		4,659
Balance at March 31, 2024	81,406,827	$	8	59,349,000	$	6	$	952,227	$	(306,842)	$	25,652	$	671,051	$	719,037	$	1,390,088

The accompanying notes are an integral part of these consolidated financial statements.

Utz Brands, Inc.

CONSOLIDATED STATEMENT OF CASH FLOWS

For the thirteen weeks ended March 31, 2024 and April 2, 2023

(In thousands)

(Unaudited)


	Thirteen weeks ended March 31, 2024		Thirteen weeks ended April 2, 2023
Cash flows from operating activities
Net income (loss)	$	2,397	$	(14,482)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Impairment and other charges	—		1,945
Depreciation and amortization	18,302		20,094
Gain on sale of business	(44,015)		—
Loss on remeasurement of warrant liability	11,808		2,232
Loss on sale of assets	470		508
Share-based compensation	3,913		4,634
Deferred taxes	6,159		357
Deferred financing costs	1,760		5
Changes in assets and liabilities:
Accounts receivable, net	(8,578)		(71)
Inventories	(6,190)		(5,450)
Prepaid expenses and other assets	(6,503)		(2,123)
Accounts payable and accrued expenses and other	11,412		(16,092)
Net cash used in operating activities	(9,065)		(8,443)
Cash flows from investing activities

Purchases of property and equipment	(13,630)		(13,906)

Proceeds from sale of property and equipment	6,006		451
Proceeds from sale of business	167,500		—
Proceeds from sale of routes	7,199		6,127
Proceeds from the sale of IO notes	855		867

Notes receivable	(9,919)		(7,557)
Net cash provided by (used in) investing activities	158,011		(14,018)
Cash flows from financing activities
Borrowings on line of credit	37,000		20,000
Repayments on line of credit	(37,119)		—
Borrowings on term debt and notes payable	9,798		2,331
Repayments on term debt and notes payable	(154,239)		(6,244)

Payments of tax withholding requirements for employee stock awards	(1,397)		(589)

Dividends	(4,625)		(4,663)
Distribution to noncontrolling interest	(3,383)		(3,383)
Net cash (used in) provided by financing activities	(153,965)		7,452
Net decrease in cash and cash equivalents	(5,019)		(15,009)
Cash and cash equivalents at beginning of period	52,023		72,930
Cash and cash equivalents at end of period	$	47,004	$	57,921

The accompanying notes are an integral part of these consolidated financial statements.

Utz Brands, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation – The accompanying consolidated financial statements comprise the financial statements of Utz Brands, Inc. ("UBI" or the "Company") and its wholly owned subsidiaries. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial statements and pursuant to the accounting and disclosure rules and regulations of the U.S. Securities and Exchange Commission (the "SEC"). They do not include all information and notes required by U.S. GAAP for annual financial statements. However, except as disclosed herein, there has been no material change in the information disclosed in the Notes to Consolidated Financial Statements included in the Company’s financial statements for the year ended December 31, 2023. The balance sheet as of December 31, 2023 has been derived from the audited consolidated financial statements as of and for the year ended December 31, 2023. In the opinion of management, such financial information reflects all normal and recurring adjustments necessary for a fair presentation of the financial position and the results of operations for such interim periods in accordance with the U.S. GAAP. Operating results for the interim period are not necessarily indicative of the results that may be expected for any future period or for the full year. The consolidated interim financial statements, including our significant accounting policies, should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2023. All intercompany transactions and balances have been eliminated in consolidation.

Prior Period Revision - Consolidated Statement of Cash Flows– For the thirteen weeks ended March 31, 2024, the Company disclosed the borrowings of lines of credit and repayments of lines of credit as separate line items within the financing activities section of the Consolidated Statement of Cash Flows. The Company has corrected these line items for the thirteen weeks ended April 2, 2023 for comparability purposes and deems the change to that period to be immaterial.

Revenue Recognition – The Company’s revenues primarily consist of the sale of salty snack items to customers, including supermarkets, mass merchants, club stores, dollar and discount stores, convenience stores, independent grocery stores, drug stores, food service, vending, military, and other channels. The Company sells its products in most regions of the United States primarily through its direct-store delivery ("DSD") network, direct to warehouse shipments, and third-party distributors. These revenue contracts generally have a single performance obligation. Revenue, which includes shipping and handling charges billed to the customer, is reported net of variable consideration and consideration payable to customers, including applicable discounts, returns, allowances, trade promotion, consumer coupon redemption, unsaleable product, and other costs, some of which are recorded in Selling and distribution. Amounts billed and due from customers are classified as accounts receivables and require payment on a short-term basis and, therefore, the Company does not have any significant financing components.

The Company recognizes revenue when (or as) performance obligations are satisfied by transferring control of the goods to customers. Control is transferred upon delivery of the goods to the customer. Shipping and/or handling costs that occur before the customer obtains control of the goods are deemed to be fulfillment activities and are accounted for as fulfillment costs. Applicable shipping and handling are included in customer billing and are recorded as revenue as the products’ control is transferred to customers. The Company assesses the goods promised in customer purchase orders and identifies a performance obligation for each promise to transfer a good that is distinct.

The Company offers various forms of trade promotions and the methodologies for determining these provisions are dependent on local customer pricing and promotional practices, which range from contractually fixed percentage price reductions to provisions based on actual occurrence or performance. The Company’s promotional activities are conducted either through the retail trade or directly with consumers and include activities such as in store displays and events, feature price discounts, consumer coupons, and loyalty programs. The costs of these activities are recognized at the time the related revenue is recorded, which normally precedes the actual cash expenditure. The recognition of these costs therefore requires management judgment regarding the volume of promotional offers that will be redeemed by either the retail trade customer or consumer. These estimates are made using various techniques including historical data on performance of similar promotional programs. The Company has reserves in place of $10.8 million as of March 31, 2024, which include adjustments taken by customers of $5.1 million that are awaiting final processing and reserves of $17.4 million as of December 31, 2023, which include adjustments taken by customers of $6.2 million that are awaiting final processing. Differences between estimated expense and actual redemptions are recognized as a change in management estimate as actual redemptions are incurred.

Recently Issued Accounting Standards – In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-09, Income Taxes: Improvements to Income Tax Disclosures, to amend existing income tax disclosure guidance, primarily requiring more detailed disclosures for income taxes paid and the effective tax rate reconciliation. The ASU is effective for annual reporting periods beginning after December 15, 2024, with early adoption permitted and can be applied on either a prospective or retroactive basis. The Company is currently evaluating the ASU to determine its impact on the Company's income tax disclosures.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting: Improvements to Reportable Segment Disclosures, to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. Among other changes, the amendments will require disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss. The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and should be applied on a retrospective basis. Early adoption is permitted. The Company is currently evaluating the ASU to determine its impact on the Company's disclosures.

2.DIVESTITURE

On February 5, 2024, the Company sold certain assets and brands to affiliates of Our Home™, an operating company of Better-for-You brands (“Our Home”). Under the agreement, affiliates of Our Home purchased the Good Health and R.W. Garcia brands, the Lincolnton, NC, and Lititz, PA manufacturing facilities and certain related assets, and assumed the Company’s Las Vegas, NV facility lease and manufacturing operations (the "Good Health and R.W. Garcia Sale") for $167.5 million, subject to customary adjustments.

The following table summarizes the net assets and liabilities included in the Good Health and R.W. Garcia Sale:






Property, plant, and equipment, net	$	27,483
Goodwill	44,600
Intangible assets, net	44,327



Net working capital adjustments	7,075



Net assets sold	$	123,485

The Company recognized a gain on the Good Health and R.W. Garcia Sale of $44.0 million. The gain on the Good Health and R.W. Garcia Sale is recognized as Gain on sale of business in the Consolidated Statements of Operations and Comprehensive Income (Loss) for the thirteen weeks ended March 31, 2024.

The Company and Our Home will operate under a transition services agreement for 12 months. In addition, following the closing of the Good Health and R.W. Garcia Sale, the parties will operate under reciprocal co-manufacturing agreements under which Our Home will co-manufacture certain of the Company's products and the Company will co-manufacture certain Good Health products. Certain Good Health products will continue to be distributed and sold on the Company's DSD network for Our Home. The Company received approximately $15.5 million in advance from Our Home for certain terms under these agreements for which the Company will recognize through income from operations over the term of the transition services agreement and co-manufacturing agreements.

3.INVENTORIES

Inventories consisted of the following:


(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

In connection with the Good Health and R.W. Garcia Sale in February 2024, the Company sold inventory of $6.3 million. See Note 2. Divestiture.

4.PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net, consisted of the following:


(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
Land improvements	3,199		3,887
Building improvements	1,740		5,163
Construction-in-progress	40,174		35,533
	410,986		445,633
Less: accumulated depreciation	(115,150)		(126,752)
Property, plant and equipment, net	$	295,836	$	318,881

Depreciation expense was $8.7 million and $10.4 million for the thirteen weeks ended March 31, 2024 and April 2, 2023, respectively. Depreciation expense is classified in cost of goods sold, selling, distribution, and administrative expenses on the Consolidated Statements of Operations and Comprehensive Income (Loss). During the thirteen weeks ended April 2, 2023, the Company recognized expense of $1.9 million related to the impairment of equipment.

During the thirteen weeks ended March 31, 2024, in connection with the Good Health and R.W. Garcia Sale as described in Note 2. Divestiture, the Company sold its Lincolnton, NC, and Lititz, PA manufacturing facilities and certain related assets having a book value of $27.5 million. The Company also sold its manufacturing facility in Birmingham, AL for proceeds of $6.0 million. The Birmingham, AL manufacturing facility was classified as Assets held for sale on the Consolidated Balance Sheet at December 31, 2023.

5.GOODWILL AND INTANGIBLE ASSETS, NET

A rollforward of goodwill is as follows:


(in thousands)
December 31, 2023	$	915,295
Good Health and R.W. Garcia Sale, Note 2. Divestiture	(44,600)
Balance as of March 31, 2024	$	870,695

Intangible assets, net, consisted of the following:


(in thousands)	As of March 31, 2024		As of December 31, 2023
Subject to amortization:
Distributor/customer relationships	$	647,712	$	677,930
Trademarks	59,920		63,850
Amortizable assets, gross	707,632		741,780
Accumulated amortization	(124,824)		(120,405)
Amortizable assets, net	582,808		621,375
Not subject to amortization:
Trade names	419,513		434,513
Route assets	8,916		7,525
Intangible assets, net	$	1,011,237	$	1,063,413

The Company sold customer relationships and trademarks in the amount of $26.0 million and $18.3 million, respectively, related to the Good Health and R.W. Garcia Sale. See Note 2. Divestiture for further discussion. There were no other significant changes to intangible assets during the thirteen weeks ended March 31, 2024 and April 2, 2023 other than those which arise from the normal course of business from buying and selling of Company-owned route assets and amortization.

Amortization of the distributor/customer relationships, technology, and trade names amounted to $9.2 million and $9.4 million for the thirteen weeks ended March 31, 2024 and April 2, 2023, respectively. The expense related to the amortization of intangibles is classified in administrative expenses on the Consolidated Statements of Operations and Comprehensive Income (Loss).

6.NOTES RECEIVABLE

Contracts are executed between the Company and IOs for the sale of the product distribution routes, including a note in favor of the Company, in certain cases. The notes bear interest at rates ranging from 4.50% to 10.31% with terms ranging generally from two to ten years. The notes receivable balances due from IOs at March 31, 2024 and December 31, 2023 totaled $16.4 million and $17.6 million, respectively, and are collateralized by the routes for which the loans are made. The Company also sold certain of these notes to Bank of America and one other bank. The Company has a corresponding notes payable liability, related to these sold IOs notes receivables. See Note 10. Contingencies.

7.ACCRUED EXPENSES AND OTHER

Current accrued expenses and other consisted of the following:


(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		—
Operating right of use liability	15,063		14,992
Insurance liabilities	7,230		6,811
Accrued freight and manufacturing related costs	3,331		4,424
Accrued dividends and distributions	8,136		7,972
Accrued interest	927		13,280
Deferred transition services and other fees (a)	12,727		—
Other accrued expenses	11,052		8,645
Total accrued expenses and other	$	91,278	$	77,590

(a) See Note 2. Divestiture, for further discussion.

Non-current accrued expenses and other consisted of the following:


(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
Supplemental retirement and salary continuation plans	6,748		6,559
Long-term portion of an interest rate hedge liability	—		1,936
Total accrued expenses and other	$	73,691	$	76,720

8.TERM DEBT, REVOLVING CREDIT FACILITY AND OTHER NOTES PAYABLE

Term Debt and Revolving Credit Facility

Term debt and revolving credit facilities consists of the following:


Debt (in thousands)	Original Principal Balance		Maturity Date	As of March 31, 2024		As of December 31, 2023
Term Loan B	$	795,000	January-28	$	630,335	$	771,335
Real Estate Term Loan (1)	$	88,140	October-32	70,891		80,184
Equipment loans (2)	$	79,814		62,435		56,482
ABL facility (3)			October-27	248		368
Net impact of debt issuance costs and original issue discounts				(7,012)		(8,772)
Total long-term debt				756,897		899,597
Less: current portion				(20,651)		(21,086)
Long term portion of term debt and financing obligations				$	736,246	$	878,511

(1) Loan by City National Bank which is secured by a majority of the real estate assets of the Company ("Real Estate Term Loan").

(2) Equipment loans have varying maturities from November 2024 to September 2028.

(3) Asset-based revolving credit facility ("ABL facility").

In connection with the Good Health and R.W. Garcia Sale as described in Note 2. Divestiture, the Company made a $141.0 million payment on its Term Loan B and $8.5 million payment on its Real Estate Term Loan during thirteen weeks ended March 31, 2024.

Other Notes Payable and Capital Leases

Amounts outstanding under notes payable consisted of the following:


(in thousands)	As of March 31, 2024		As of December 31, 2023
Note payable – IO notes	$	15,594	$	16,478
Finance lease obligations	11,088		10,145
Other	100		200
Total notes payable	26,782		26,823
Less: current portion	(7,696)		(7,649)
Long term portion of notes payable	$	19,086	$	19,174

Interest Expense

Interest expense consisted of the following:


(in thousands)	Thirteen weeks ended March 31, 2024		Thirteen weeks ended April 2, 2023
Company’s ABL facility and other long-term debt	$	11,782	$	14,142
Amortization of deferred financing fees	1,760		5
IO loans	289		231
Total interest	$	13,831	$	14,378

9.DERIVATIVE FINANCIAL INSTRUMENTS, PURCHASE COMMITMENTS, WARRANTS AND FAIR VALUE

Derivative Financial Instruments

The Company uses interest rate swaps to manage its interest rate exposure on its Term Loan B and its Real Estate Term Loan. The interest rate swaps are recorded on the Company’s Consolidated Balance Sheets at fair value. See Note 8. Term Debt, Revolving Credit Facility, and Other Notes Payable.

In conjunction with Real Estate Term Loan pay downs during the thirteen weeks ended March 31, 2024 discussed within Note 8. Term Debt, Revolving Credit Facility, and Other Notes Payable and estimated future pay downs, the Company determined that $36.7 million of hedged forecasted transactions were not probable of occurring. As such, effective February 1, 2024, the Company de-designated its interest rate hedge accounting on its Real Estate Term Loan and re-designated a new interest hedging relationship totaling $47.0 million. As a result, the Company immediately reclassified $0.3 million of accumulated other comprehensive income to earnings which is reflected as a decrease to interest expense within the Consolidated Statements of Operations and Comprehensive Income (Loss). As of March 31, 2024, $36.7 million of the remaining notional of the Company's interest rate swap will be recorded at fair value with mark-to-market adjustments recorded immediately in earnings.

As of and for the thirteen weeks ended March 31, 2024, there were no changes to the hedge accounting related to Term Loan B.

Warrant Liabilities

As of each of March 31, 2024 and December 31, 2023, there were 7,200,000 private placement warrants outstanding which are accounted for as derivative liabilities pursuant to ASC 815-40. A reconciliation of the changes in the warrant liability during the thirteen weeks ended March 31, 2024 is as follows:


(in thousands)
Fair value of warrant liabilities as of December 31, 2023	$	43,272
Loss on remeasurement of warrant liability	11,808
Fair value of warrant liabilities as of March 31, 2024	$	55,080

Purchase Commitments

The Company has outstanding purchase commitments for specific quantities at fixed prices for certain key ingredients to economically hedge commodity input prices. These purchase commitments totaled $97.1 million as of March 31, 2024 and $66.7 million as of December 31, 2023. The Company accrues for losses on firm purchase commitments in a loss position at the end of each reporting period to the extent that there is an active observable market. The Company has recorded purchase commitment gains (losses) totaling $0.8 million for the thirteen weeks ended March 31, 2024 and $(2.7) million for the thirteen weeks ended April 2, 2023, respectively.

Fair Value

The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis based upon the level within the fair value hierarchy in which the fair value measurements fall, as of March 31, 2024:


(in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents	$	47,004	$	—	$	—	$	47,004
Commodity contracts	—		563		—		563
Interest rate swaps	—		36,451		—		36,451
Total assets	$	47,004	$	37,014	$	—	$	84,018
Liabilities:
Commodity contracts	$	—	$	1,269	$	—	$	1,269
Private placement warrants	—		55,080		—		55,080
Debt	—		756,897		—		756,897
Total liabilities	$	—	$	813,246	$	—	$	813,246


(in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents	$	52,023	$	—	$	—	$	52,023
Commodity contracts	—		211		—		211
Interest rate swaps	—		33,332		—		33,332
Total assets	$	52,023	$	33,543	$	—	$	85,566
Liabilities:
Commodity contracts	$	—	$	2,094	$	—	$	2,094
Interest rate swaps	—		1,936		—		1,936
Private placement warrants	—		43,272		—		43,272
Debt	—		899,597		—		899,597
Total liabilities	$	—	$	946,899	$	—	$	946,899

10.CONTINGENCIES

Litigation Matters

The Company is involved in litigation and other matters incidental to the conduct of its business, the results of which, in the opinion of management, are not likely to be material to the Company’s financial condition, results of operations or cash flows.

Guarantees

The Company partially guarantees loans made to IOs by Bank of America for the purchase of routes. The outstanding balance of loans guaranteed that were issued by Bank of America was $56.3 million and $52.8 million at March 31, 2024 and December 31, 2023, respectively, which are accounted for as an off balance sheet arrangement. As discussed in Note 8. Term Debt, Revolving Credit Facility, and Other Notes Payable, the Company also sold notes receivable on its books to Bank of America during fiscal years 2023, and 2024, which the Company partially guarantees. The outstanding balance of notes purchased by Bank of America at March 31, 2024 and December 31, 2023 was $14.0 million and $14.8 million, respectively. Due to the structure of the transactions, the sale did not qualify for sale accounting treatment, and as such the Company records the notes payable obligation owed by the IOs to the financial institution on its Consolidated Balance Sheets; the corresponding note receivable also remained on the Company’s Consolidated Balance Sheets. The maximum amount of future payments the Company could be required to make under these guarantees equates to 25% of the outstanding loan balance on the first day of each calendar year plus 25% of the amount of any new loans issued during such calendar year.

Additionally, the Company guarantees loans for the purchase of routes made by two other banks. The outstanding balances of these loans were $2.5 million and $2.9 million at March 31, 2024 and December 31, 2023, respectively, of which $2.0 million and $2.2 million was included in the Company's Consolidated Balance Sheets at March 31, 2024 and December 31, 2023, respectively. The maximum amount of future payments the Company could be required to make under the guarantees equates to 25% of the outstanding loan balance.

All of the above IO loans are collateralized by the routes for which the loans are made. Accordingly, the Company has the ability to recover substantially all of the outstanding loan value upon default.

11.SUPPLEMENTARY CASH FLOW INFORMATION


(in thousands)	Thirteen weeks ended March 31, 2024		Thirteen weeks ended April 2, 2023
Cash paid for interest	$	24,424	$	14,408
Refunds related to income taxes	$	22	$	63
Payments for income taxes	$	15	$	6
Finance lease additions	$	1,763	$	308

12.INCOME TAXES

The Company is subject to federal and state income taxes with respect to our allocable share of any taxable income or loss of UBH, as well as any standalone income or loss the Company generates. UBH is treated as a partnership for federal income tax purposes, and for most applicable state and local income tax purposes, and generally does not pay income taxes in most jurisdictions. Instead, UBH taxable income or loss is passed through to its members, including the Company. Despite its partnership treatment, UBH is liable for income taxes in those states not recognizing its pass-through status and for certain of its subsidiaries not taxed as pass-through entities. The Company has acquired various domestic entities taxed as corporations, which are now wholly-owned by us or our subsidiaries. Where required or allowed, these subsidiaries also file and pay tax as a consolidated group for federal and state income tax purposes. The Company anticipates this structure to remain in existence for the foreseeable future.

The Company recorded income tax expense of $26.5 million and benefit of $2.6 million for the thirteen weeks ended March 31, 2024 and April 2, 2023, respectively. The effective tax rates for the thirteen weeks ended March 31, 2024 and April 2, 2023 were 91.7% and 15.3%, respectively. The Company’s effective tax rates differ from the federal statutory rate of 21% primarily due to the impact of UBH, which is a partnership, is not taxed at the Company level, and is required to allocate some of its taxable results to the Continuing Members, as well as state taxes and the fair value impact of warrant liabilities. The Company’s effective tax rate for the thirteen weeks ended March 31, 2024 was 1.7% before consideration of any discrete items. During the thirteen weeks ended March 31, 2024, the effective tax rate was impacted by the sale certain assets and brands to affiliates of Our Home™ and statutory state tax rate changes which resulted in a discrete tax expense of $26.1 million and $0.5 million, respectively.

The Company regularly evaluates valuation allowances established for deferred tax assets (“DTA's”) for which future realization is uncertain. The Company assessed the available positive and negative evidence to estimate whether future taxable income would be generated to permit use of the existing DTA's. As of March 31, 2024, a significant piece of objective negative evidence evaluated was the twelve-quarter cumulative loss before taxes. Such objective evidence limits the ability to consider other subjective evidence, such as projections for future growth. The Company determined that there is uncertainty regarding the utilization of certain DTA's such as the investment in UBH, federal operating losses subject to annual limitations due to “change in ownership” provisions, and state net operating losses where the Company does not expect to continue to have nexus. Therefore, a valuation allowance has been recorded against the DTA's for which it is more likely than not they will not be realized. The Company has DTA’s related to its investment in the partnership that are expected to be realized in the ordinary course of operations or generate future net operating losses for which a portion will have an indefinite carryforward period. Additionally, the Company has deferred tax liabilities (“DTL’s”) related to its investment in the partnership that will not reverse in the ordinary course of business and will only reverse when the partnership is sold or liquidated. The Company has no intention of disposing of or liquidating the partnership and therefore has not considered the indefinite lived DTL as a source of income to offset other DTA’s. In weighing positive and negative evidence, both objective and subjective, including its twelve-quarter cumulative loss, the Company has recorded a valuation allowance against its DTA’s related to net operating losses and deductible book/tax differences and recorded a DTL primarily related to the book over tax basis in the investment in the partnership that will not reverse in the ordinary course of business. The Company considered that an indefinite lived DTL may be considered as a source of taxable income for an indefinite lived DTA; however, given our indefinite lived DTL will only reverse upon sale or liquidation, the Company determined that it was more appropriate to record a valuation allowance against a portion of its DTA’s. The amount of DTA considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as projections for growth.

As of March 31, 2024, tax years 2020 through 2024 remain open and subject to examination by the Internal Revenue Service and the majority of the states where the Company has nexus, and tax years 2019 through 2024 remain open and subject to examination in selected states that have a four year statute of limitations.

Upon audit, tax authorities may challenge all or part of a tax position. A tax position successfully challenged by a taxing authority could result in an adjustment to our provision for income taxes in the period in which a final determination is made. The Company did not maintain any unrecognized tax benefits as of March 31, 2024 and December 31, 2023.

Tax receivable agreement liability

Pursuant to an election under section 754 of the Internal Revenue Code, the Company obtained an increase in its share of the tax basis in the net assets of UBH when it was deemed to purchase UBH units from a third party then holding common and preferred interest of the Continuing Members and purchased UBH units from the Continuing Members per the Business Combination Agreement. The Continuing Members have the option to exchange UBH units along with the forfeiture of a corresponding number of Class V Common Stock of the Company for UBI common stock post-Business Combination. The Company intends to treat any such exchanges as direct purchases for U.S. federal income tax purposes, which is expected to further increase its share of the tax basis in the net assets of UBH. The increases in tax basis may reduce the amounts the Company would otherwise pay in the future to various tax authorities. They may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.

Pursuant to the Business Combination Agreement, the Company entered into the Tax Receivable Agreement in connection with the Business Combination (the “Tax Receivable Agreement” or "TRA") , which provides for the payment by the Company of 85% of the amount of any tax benefits realized as a result of (i) increases in the share of the tax basis in the net assets of UBH resulting from the Business Combination and any future exchanges by the Continuing Members of UBH units for UBI common stock; (ii) tax basis increases attributable to payments made under the TRA; and (iii) tax amortization deductions attributable to the acquisition of Kennedy and the election to treat the transaction as an asset deal for tax purposes (the "TRA Payments"). The rights of each party under the TRA other than the Company are assignable, subject to certain restrictions. The timing and amount of aggregate payments due under the TRA may vary based on a number of factors, including the timing and amount of taxable income generated by the Company each year, as well as the tax rate then applicable, among other factors.

As of March 31, 2024 and December 31, 2023, the Company had a liability of $24.2 million and $24.3 million, respectively, related to its projected obligations under the TRA, which is reflected as current and non-current accrued expenses in the Consolidated Balance Sheets.

13.LOSS PER SHARE

Basic loss per share is based on the weighted average number of shares of Class A Common Stock issued and outstanding during the periods. Diluted loss per share is based on the weighted average number of shares of Class A Common Stock issued and outstanding and the effect of all dilutive common stock equivalents and potentially dilutive share-based awards outstanding during the periods.

The following table reconciles the numerators and denominators used in the computations of both basic and diluted loss per share:

(in thousands, except share data)

Thirteen weeks ended March 31, 2024

Thirteen weeks ended April 2, 2023

Numerator:

Net loss attributable to common stockholders