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What changed in Utz Brands, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Utz Brands, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+455 added−488 removedSource: 10-K (2023-03-02) vs 10-K (2022-03-03)

Top changes in Utz Brands, Inc.'s 2023 10-K

455 paragraphs added · 488 removed · 344 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

81 edited+25 added−21 removed40 unchanged
Biggest changeOur flagship Utz brand generated retail sales in excess of $670 million in 2021, representing approximately 5.5% compound annual growth rate (“CAGR”) (2017-2021) and making it one of the 10 largest salty snack brands in the United States by retail sales as of January 2, 2022.
Biggest changeOur Power Brands are comprised of our iconic heritage Utz brand and iconic On The Border® brand; craft brands such as Zapp’s ®, Golden Flake ® Pork Skins, TORTIYAHS!, and Hawaiian ®; BFY brands such as Good Health ® and Boulder Canyon ®; and selected licensed brands such as TGI Fridays ®. 8 Our flagship Utz brand generated retail sales in excess of $807 million in 2022, representing an approximate 10.3% CAGR (during 2019 through 2022) and making it one of the 10 largest salty snack brands in the United States by retail sales as of January 1, 2023.
Historically, the months of April-September and December have resulted in higher retail sales than average due to increased consumer demand during the spring and summer months and holiday season, as well as significant retailer merchandising and promotions around those times.
Historically, the months of April to September, as well as December have resulted in higher retail sales than average due to increased consumer demand during the spring and summer months and holiday season, as well as significant retailer merchandising and promotions around those times.
We also believe that our diversified product portfolio results in more predictable and stable financial performance as we are not overly exposed to only one product sub-category. Product Innovation New product innovation is critical in the salty snacks category because consumers both enjoy long-time favorites and like to experiment with new forms, flavors, textures, and ingredients.
We also believe that our diversified product portfolio results in more predictable and stable financial performance as we are not overly exposed to only one product sub-category. 9 Product Innovation New product innovation is critical in the salty snacks category because consumers both enjoy long-time favorites and like to experiment with new forms, flavors, textures, and ingredients.
For example, Zapp’s , which we acquired in 2011, offers a line of premium kettle-cooked potato chips with bold, authentic flavors steeped in its New Orleans roots, including “Voodoo,” “Hotter ‘N’ Hot Jalapeño,” “Spicy Cajun Crawtators,” and “Cajun Dill Gator-tators,” among others.
For example, Zapp’s , which we acquired in 2011, offers a line of premium kettle-cooked potato chips with bold, authentic flavors steeped in its New Orleans roots, including “Voodoo,” “Hotter ‘N’ Hot Jalapeño,” “Spicy Cajun Crawtators,” and "Cajun Dill Gator-tators,” among others.
Additionally, the acquisition of OTB strengthens our national geographic footprint in our Expansion Geographies and Emerging Geographies and enhances our presence in the Mass and Club retail channels. 6 Our Good Health and Boulder Canyon Power Brands anchor our position in the BFY category of salty snacking, which has been a high-growth category in recent years.
Additionally, the acquisition of OTB strengthens our national geographic footprint in our Expansion Geographies and Emerging Geographies and enhances our presence in the Mass and Club retail channels. Our Good Health and Boulder Canyon Power Brands anchor our position in the BFY category of salty snacking, which has been a high-growth category in recent years.
Utz and our associates are dedicated to providing a safe environment by continuously improving our Safety Culture and Performance through commitment, investment, and training. • Associate engagement: Leading indicators are used to both encourage and measure regular safety related activities throughout the organization • Training: Safety training relevant to each work group’s operation is distributed throughout the organization monthly, quarterly and/or annually • Compliance: Regular audits in various formats are used to review and ensure compliance with applicable agency regulations • Performance metrics: Traditional OSHA metrics are maintained on a quarterly and annual basis to measure actual performance and help identify continuous improvement opportunities 11 Total Rewards We have a demonstrated history of investing in our workforce by providing competitive wages and benefits.
Utz and our associates are dedicated to providing a safe environment by continuously improving our Safety Culture and Performance through commitment, investment, and training. • Associate engagement: Leading indicators are used to both encourage and measure regular safety related activities throughout the organization; • Training: Safety training relevant to each work group’s operation is distributed throughout the organization monthly, quarterly and/or annually; • Compliance: Regular audits in various formats are used to review and ensure compliance with applicable agency regulations; and • Performance metrics: Traditional OSHA metrics are maintained on a quarterly and annual basis to measure actual performance and help identify continuous improvement opportunities. 14 Total Rewards We have a demonstrated history of investing in our workforce by providing competitive wages and benefits.
On May 11, 2021, the Company announced that its subsidiary, Utz Quality Foods, LLC (“UQF”) entered into a definitive agreement with Great Lakes Festida Holdings, Inc. to acquire all assets including real estate located in Grand Rapids, Michigan related to the operations of Festida Foods ("Festida Foods acquisition" or "acquisition of Festida Foods"), a manufacturer of tortilla chips, corn chips, and pellet snacks, and the largest manufacturer of tortilla chips for the Company's ON THE BORDER® brand.
On May 11, 2021, the Company announced that its subsidiary, Utz Quality Foods, LLC ("UQF”) entered into a definitive agreement with Great Lakes Festida Holdings, Inc. to acquire all assets including real estate located in Grand Rapids, Michigan related to the operations of Festida Foods ("Festida Foods acquisition" or "acquisition of Festida Foods"), a manufacturer of tortilla chips, corn chips, and pellet snacks, and the largest manufacturer of tortilla chips for the Company's ON THE BORDER® brand.
We recognize our responsibility to uphold the Company’s founding values, which for more than 100 years, have centered on working ethically, responsibly, and with integrity to benefit all of our stakeholders. We consistently look for ways to make a positive difference for our employees, customers and in the communities in which we operate.
We recognize our responsibility to uphold the Company’s founding values, which for more than 100 years, have centered on working ethically, responsibly, and with integrity to benefit all of our stakeholders. We consistently look for ways to make a positive difference for our associates, customers and in the communities in which we operate.
We conduct marketing efforts through three principal sets of activities: (i) consumer marketing and advertising, including sponsorships, print, digital, eCommerce and social media, and other product promotions; (ii) consumer sales incentives including coupons and rebates; and (iii) trade promotions to support features, displays and other merchandising of our products by our customers.
We conduct marketing efforts through three principal sets of activities: (i) consumer marketing and advertising, including digital and eCommerce, social media, sponsorships, and other consumer promotions; (ii) consumer sales incentives including coupons and rebates; and (iii) trade promotions to support features, displays and other merchandising of our products by our customers.
We monitor these regulatory requirements and our compliance on a regular basis. 13 Available Information Our website is www.utzsnacks.com . The information found on, or that can be accessed from or that is hyperlinked to, our website is not part of this Annual Report on Form 10-K.
We monitor these regulatory requirements and our compliance on a regular basis. 16 Available Information Our website is www.utzsnacks.com . The information found on, or that can be accessed from or that is hyperlinked to, our website is not part of this Annual Report on Form 10-K.
Additionally, we believe our distribution system is highly scalable, resulting in the ability to drive higher margins on incremental revenues and enabling us to realize significant cost savings when integrating acquired brands into our established platform.
Additionally, we believe our distribution system is highly scalable, resulting in the ability to drive higher margins on incremental revenues and enabling us to realize significant cost savings when integrating acquired brands onto our established platform.
These include four legacy Utz facilities and thirteen facilities that were added over the last ten years from acquisitions (for more details see Item 2 “Properties” in this Annual Report on Form 10-K for more details).
These include four legacy Utz facilities and twelve facilities that were added over the last ten years from acquisitions (for more details see Item 2 “Properties” in this Annual Report on Form 10-K for more details).
Over the last several years, we have meaningfully reduced our number of full time associates and our selling, general and administrative expenses through our business transformation initiatives, particularly our DSD shift from RSPs to IOs and the associated restructuring of our sales management and corporate organization structure (see “— Supply Chain — Distribution” and “ Management’s Discussion and Analysis of Financial Condition and Results of Operations of Utz Brands Holdings — Recent Developments and Significant Items Affecting Comparability —Independent Operator Conversions ” for more information).
Over the last several years, we have meaningfully reduced our number of full-time associates and our selling, distribution and administrative expenses through our business transformation initiatives, particularly our DSD shift from RSPs to IOs and the associated restructuring of our sales management and corporate organization structure (see “— Supply Chain — Distribution” and "Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations of Utz Brands Holdings — Recent Developments and Significant Items Affecting Comparability —Independent Operator Conversions ” for more information).
Our Emerging geographies consist of Alaska, Arizona, California, Florida, Hawaii, Idaho, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Texas, Utah, Wisconsin, and Wyoming (our “Emerging Geographies”). Overview We are a leading United States manufacture of branded salty snacks.
Our Emerging geographies consist of Alaska, Arizona, California, Florida, Hawaii, Idaho, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Texas, Utah, Wisconsin, and Wyoming (our "Emerging Geographies”). Overview We are a leading United States manufacturer of branded salty snacks.
We believe company success depends on our ability to attract, develop, and retain key personnel whose skills, experience and industry knowledge benefit our operations and performance. The Company’s Board, Board committees, and management oversee various associate initiatives including compensation and benefits programs, succession planning, leadership development, diversity and inclusion.
We believe our success depends on our ability to attract, develop, and retain key personnel whose skills, experience and industry knowledge benefit our operations and performance. Our Board, Board committees, and management oversee various associate initiatives including compensation and benefits programs, succession planning, leadership development, diversity and inclusion.
Customers In fiscal year 2021, our top 10 customers, all of which are retailers, represented approximately 40% of our invoiced sales, and no customer accounted for more than 15% of our invoiced sales in fiscal year 2021.
Customers In fiscal year 2022, our top 10 customers, all of which are retailers, represented approximately 40% of our invoiced sales, and no customer accounted for more than 15% of our invoiced sales in fiscal year 2022.
The direct-to-warehouse (“DTW”) model is often preferred by some of our national mass, club, and grocery customers that have sufficient scale and capabilities to efficiently manage distribution and replenishment for their own retail stores. Direct-Store-Delivery: We believe we are one of only four scale U.S. salty snack providers with extensive DSD capabilities.
The DTW model is often preferred by some of our national mass, club, and grocery customers that have sufficient scale and capabilities to efficiently manage distribution and replenishment for their own retail stores. 12 Direct-Store-Delivery: We believe we are one of only four scale U.S. salty snack providers with extensive DSD capabilities.
Our iconic portfolio of authentic, craft, and “better-for-you” (“BFY”) brands, which includes Utz, Zapp’s, ON THE BORDER, Golden Flake, Good Health and Boulder Canyon , among others, enjoys strong household penetration in the United States, where our products can be found in approximately half of U.S. households.
Our iconic portfolio of authentic, craft, and “better-for-you” (“BFY”) brands, which includes Utz, Zapp’s, On The Border, Golden Flake, Good Health and Boulder Canyon , among others, enjoys strong household penetration in the United States, where our products can be found in approximately half of U.S. households as of January 1, 2023.
Given our long-standing customer relationships, broad production capabilities, and scalable distribution platform, we plan to strengthen our presence in certain salty snack sub-categories that we believe are highly synergistic to our existing business.
Given our long-standing customer relationships, broad production capabilities, and scalable distribution platform, we plan to continue expanding our presence in certain salty snack sub-categories that we believe are highly synergistic to our existing business.
We also maintain rights to the domain name www.utzsnacks.com and www.getutz.com, among others. 12 We believe the protection of our intellectual property, particularly our trademarks, trade dress, trade secrets, copyrights and domain names, is important to our success.
We also maintain rights to the domain names www.utzsnacks.com and www.getutz.com, among others. 15 We believe the protection of our intellectual property, particularly our trademarks, trade dress, trade secrets, copyrights and domain names, is important to our success.
Item 1. Business Unless the context otherwise requires, all references in this subsection to the “Company,” “we,” “us” or “our” refer to Utz Brands, Inc. and its consolidated subsidiaries following the Business Combination, other than certain historical information which refers to the business of Utz Brands Holdings and its consolidated subsidiaries prior to the consummation of the Business Combination.
Item 1. Business Unless the context otherwise requires, all references in this subsection to the “Company,” “we,” “us” or "our” refer to Utz Brands, Inc. and its consolidated subsidiaries following the Business Combination, other than certain historical information which refers to the business of UBH and its consolidated subsidiaries prior to the consummation of the Business Combination.
Notably, in 2021, approximately $2.4 billion of salty snack retail sales were generated by approximately 1,300 smaller competitors, each with retail sales of less than $200 million. We believe this fragmented group of smaller brands provides an attractive opportunity for us to expand our retail sales by either acquiring or displacing smaller regional or product-specific competitors. Supply Chain Sourcing.
Notably, in 2022, approximately $2.6 billion of salty snack retail sales were generated by approximately 1,300 smaller competitors, each with retail sales of less than $200 million. We believe this fragmented group of smaller brands provides an attractive opportunity for us to expand our retail sales by either acquiring or displacing smaller regional or product-specific competitors. 11 Supply Chain Sourcing.
We will continue to expand our investments in digital and social media, including as part of our strategy to grow our eCommerce and retailer marketing investments. We believe these marketing strategies will drive long term Net Sales growth by increasing brand equity, supporting geographic expansion and reducing the pressures of pricing. Digital and Social Media .
We will continue to expand our investments in digital and social media, including as part of our strategy to grow our eCommerce and retailer marketing investments. We believe these marketing strategies will drive long term Net Sales growth by increasing brand equity, supporting geographic expansion.
Recognized for its iconic logo featuring the “Little Utz Girl” since the 1920s, the Utz brand currently utilizes the slogan “Family Crafted Flavor Since 1921”. We sell a variety of salty snacks under the Utz brand, including potato chips, pretzels, cheese snacks, pub/party mixes, and others.
Recognized for its iconic logo featuring the “Little Utz Girl” since the 1920s, the Utz brand currently use the slogan "Family Crafted Flavor Since 1921”. We sell a variety of salty snacks under the Utz brand, including potato chips, pretzels, cheese snacks, pub/party mixes, and others.
Our direct-to-consumer shipments primarily originate from orders received via our company website (www.utzsnacks.com) or select third party retailer sites, including Amazon and Sam’s Club, which extend our reach to virtually every household in America. Our direct-to-consumer shipments are delivered from our central warehouse facility to consumers using FedEx, UPS, or other third-party carriers.
Our direct-to-consumer shipments primarily originate from orders received via our company website (www.utzsnacks.com) or select third party retailer sites, including Amazon and Sam’s Club, which extend our reach to virtually every household in America. Our direct-to-consumer shipments are delivered from our central warehouse facility to consumers using FedEx, U.S. Postal Service, or other third-party carriers.
The distributors are then responsible for selling our products to our customers and ensuring optimal retail presence within the stores they serve, utilizing both DTW and DSD capabilities. Our third-party distributors operated an additional approximately 725 DSD-style routes, reaching over 20,000 retail stores. 10 Direct-to-Consumer: We also distribute our products directly to consumers.
The distributors are then responsible for selling our products to our customers and ensuring optimal retail presence within the stores they serve, utilizing both DTW and DSD capabilities. Our third-party distributors operated an additional approximately 623 DSD-style routes, reaching over 16,000 retail stores. Direct-to-Consumer: We also distribute our products directly to consumers.
E-Commerce represented approximately 7% of our retail sales in fiscal 2021 and is an accelerating part of our business, with the channel having grown significantly since 2019. Food Safety and Quality. Food safety and quality are top priorities and we dedicate substantial resources to ensure that consumers receive consistently safe and high-quality food products.
E-Commerce represented approximately 6.6% of our retail sales in fiscal year 2022 and is an accelerating part of our business, with the channel having grown significantly since 2019. Food Safety and Quality. Food safety and quality are top priorities and we dedicate substantial resources to ensure that consumers receive consistently safe and high-quality food products.
("RW Garcia"), an artisan maker of high-quality organic tortilla chips, crackers, and corn chips ("RW Garcia acquisition"). At the closing of the transaction on December 6, 2021, the Company paid the purchase price of approximately $58.3 million which was funded in part from a draw on the Company's line of credit and cash on hand.
("RW Garcia"), an artisan maker of high-quality organic tortilla chips, crackers, and corn chips ("RW Garcia acquisition"). At the closing of the RW Garcia acquisition on December 6, 2021, the Company paid the purchase price of approximately $57.9 million which was funded in part from a draw on the Company's line of credit and cash on hand.
However, we actively manage our portfolio of brands by strategically segregating our sole operating segment into Power Brands and Foundation Brands. Power Brands, in aggregate, enjoy a combination of higher growth and margins, greater potential for value-added innovation, and enhanced responsiveness to consumer marketing as compared to Foundation Brands.
Brands Our business is managed and reported in one operating segment. However, we actively manage our portfolio of brands by strategically segregating our sole operating segment into Power Brands and Foundation Brands. Power Brands, in aggregate, enjoy a combination of higher growth and margins, greater potential for value-added innovation, and enhanced responsiveness to consumer marketing as compared to Foundation Brands.
We believe we have a strong and defensible position in our Core Geographies with a significant opportunity to enhance our national position by expanding sales in Expansion Geographies (where we represent 4.5% of category retail sales) and Emerging Geographies (where we represent 2.4% of category retail sales).
We believe we have a strong and defensible position in our Core Geographies with a significant opportunity to enhance our national position by expanding sales in Expansion Geographies (where we represent 3.6% of category retail sales) and Emerging Geographies (where we represent 2.3% of category retail sales).
Our facilities had capacity to produce approximately 450 million pounds of salty snacks annually in 2021 based on management’s estimate of available capacity, excluding weekly sanitation, over a seven-day work schedule, providing us with significant available capacity to accommodate increased sales.
Our facilities had the capacity to produce approximately 500 million pounds of salty snacks annually in 2022 based on management’s estimate of available capacity, excluding weekly sanitation, over a seven-day work schedule, providing us with significant available capacity to accommodate increased sales.
Going forward, consistent with our value creation strategies, we intend to meaningfully increase our investments in digital and social consumer marketing and advertising focused on our Power Brands as well as reallocate our current mix of media spending toward activities with the highest return on investment.
Consistent with our value creation strategies, we intend to continue to increase our investments in digital and social consumer marketing and advertising focused on our Power Brands as well as continue to allocate our current mix of media spending toward activities with the highest return on investment.
We believe each of these growth avenues represents a sizeable opportunity to expand our Net Sales. In addition, we further anticipate expanding our margins over the long term through supply chain productivity, revenue management, a higher-margin product mix, and higher margins on incremental sales as we leverage our scalable existing platform.
We believe each of these growth avenues represents a sizeable opportunity to expand our Net Sales. In addition, we further anticipate expanding our margins over the long term through supply chain productivity, revenue management, a higher-margin product mix, and higher margins on incremental sales as we leverage our scalable existing platform. Recent Developments Chief Executive Officer and Board Leadership Transition.
Our benefits package includes: • Comprehensive health insurance coverage to associates working 30 hours or more each week; • Parental leave to all new parents for birth, adoption or foster placement; • Short term disability to provide partial wage protection for up to 13 weeks; • Employee Stock Purchase Plan; • Wellness and disease management programs, health advocacy partner, and associates assistance programs; • Tuition reimbursement program; and • 401(k) plan with generous company match and profit sharing.
Our benefits package includes: • Comprehensive health insurance coverage to associates working 30 hours or more each week; • Parental leave to all new parents for birth, adoption or foster placement; • Short term disability to provide partial wage protection for up to 13 weeks; • Employee Stock Purchase Plan; • Wellness and disease management programs, health advocacy partner, and associates assistance programs; • Health & Wellness Center – free to all Hanover-based associates and dependents covered under the health plan; and • 401(k) plan with generous company match and profit sharing.
Diversity, Equity and Inclusion Utz recognizes that it’s vital for our performance as a world class company to ensure dignity and respect in the workplace for all associates.
Diversity, Equity and Inclusion Utz recognizes that it is vital for our performance as a world-class company to demonstrate dignity and respect in the workplace for all associates.
As of February 24, 2022, we believe we have entered into pricing arrangements covering over 45% of our budgeted raw material needs in fiscal year 2022. 9 Manufacturing. We manufacture our products primarily through 17 company-operated manufacturing facilities across the United States.
As of February 1, 2023, we believe we have entered into pricing arrangements covering over 45% of our budgeted raw material needs in fiscal year 2023. Manufacturing. We manufacture our products primarily through 16 company-operated manufacturing facilities across the United States.
Our DSD system is utilized by both large and small customers, and we believe it provides us a competitive advantage in expanding distribution, increasing shelf space, executing in-store merchandising activities, and ensuring products are fresh and available wherever consumers shop. Our DSD network included approximately 1,850 individual routes reaching over 80,000 retail stores in 2021.
Our DSD system is utilized by both large and small customers, and we believe it provides us a competitive advantage in expanding distribution, increasing shelf space, executing in-store merchandising activities, and ensuring products are fresh and available wherever consumers shop. Our DSD network included approximately 2,100 individual routes reaching over 83,500 retail stores in 2022.
By continuing to embrace the diverse perspectives and backgrounds of our associates, we will ensure that we have a workplace where every associate feels that they are valued and that they can contribute not only to our success, but theirs as well.
By embracing the diverse perspectives and backgrounds of our associates, we strive to ensure that we have a workplace where every associate feels that they are valued and that they can contribute not only to our success, but their success, as well.
We believe we are well-positioned for long-term growth as we (a) gained a significant amount of new buyers in the salty snack category in 2020 and repeat rates are increasing, (b) have significant opportunity in our Emerging and Growth Geographies and under-penetrated channels, (c) continue to execute productivity efforts that will help to fuel incremental marketing and innovation to accelerate growth in sales, (d) continue to make infrastructure improvements to enable us to continue to scale to greater heights, and (e) continue to make strategic acquisitions that deliver strong synergies and that enhance our competitive positioning.
We believe we are well-positioned for long-term growth as we (a) gained a significant amount of new buyers during 2020 and have continued to add even more buyers through 2022, (b) have significant opportunity in our Emerging and Expansion Geographies and under-penetrated channels, (c) continue to execute productivity efforts that will help to fuel incremental marketing and innovation to accelerate growth in sales, (d) continue to make infrastructure improvements to enable us to continue to scale to greater heights, and (e) continue to make strategic acquisitions that deliver strong synergies and that enhance our competitive positioning.
Historically we have relied more heavily on sponsorships, trade promotions, and in-store merchandising for consumer engagement, however, we are making shifts of spending into more consumer awareness and brand building advertising. In fiscal 2021, we spent approximately $11.8 million r elated to consumer marketing and advertising expenses.
Historically we have relied more heavily on sponsorships, trade promotions, and in-store merchandising for consumer engagement; however, we are making shifts of spending into more consumer awareness and brand-building advertising. In fiscal year 2022, we spent approximately $9.9 million related to consumer marketing and advertising expenses.
Government Regulation and Compliance We are subject to various laws and regulations in the United States by federal, state and local government authorities. In the United States, the federal agencies governing the manufacture, distribution and advertising of our products include, among others, the FTC; the FDA; the United States Department of Agriculture, or USDA; the U.S.
Government Regulation and Compliance We are subject to various laws and regulations in the United States by federal, state and local government authorities. In the United States, the federal agencies governing the manufacture, distribution and advertising of our products include, among others, the Federal Trade Commission (“FTC”); the U.S.
Our DSD routes are managed by a combination of approximately 1,625 IOs, covering approximately 88% of our routes, and approximately 225 RSPs, covering approximately 12% of our routes as of January 2, 2022. Over the last several years, we have converted from a predominately company-owned RSP model toward the use of third-party IOs.
Our DSD routes are managed by a combination of approximately 2,000 IOs, covering approximately 93% of our routes, and approximately 140 RSPs, covering approximately 7% of our routes as of January 1, 2023. Over the last several years, we have converted from a predominately company-owned RSP model toward the use of third-party IOs.
The acquisition increases our distribution in the Chicago area and Midwest Region and expands our product offering. The Company paid the aggregate cash purchase price of approximately $25 million which was funded from current cash-on-hand.
Vitner's business, a leading brand of salty snacks in the Chicago, Illinois area. The acquisition increases our distribution in the Chicago area and Midwest Region and expands our product offering. The Company paid the aggregate cash purchase price of approximately $25.2 million which was funded from current cash-on-hand.
It evokes the feel of the Pacific islands, with exotic flavors like “Sweet Maui Onion,” “Luau BBQ,” “Mango Habanero,” and “Hulapeño.” Our Golden Flake brand, a part of Southern culture since 1923, has a full line of Southern-style pork skins with flavors like “Louisiana Hot Sauce” and “Sweet Heat Barbecue,” which offer great taste and crunch with low carbohydrates.
Hawaiian is a premium kettle chip brand that evokes the feel of the Pacific islands, with exotic flavors like “Sweet Maui Onion,” "Luau BBQ,” "Mango Habanero,” and "Hulapeño.” Our Golden Flake brand, a part of Southern culture since 1923, has a full line of Southern-style pork skins with flavors like “Louisiana Hot Sauce” and "Sweet Heat Barbecue,” which offer great taste and crunch with low carbohydrates.
We continue to monitor customer and consumer demands, and intend to adapt our plans as needed to continue to meet these demands. Recent Acquisitions On February 8, 2021, the Company closed on a definitive agreement with Snak-King Corp. to acquire certain assets of the C.J. Vitner's business, a leading brand of salty snacks in the Chicago, IL area.
We continue to monitor customer and consumer demands, and intend to adapt our plans as needed to continue to meet these demands. Recent Acquisitions and Vertical Integrations On February 8, 2021, the Company closed on a definitive agreement with Snak-King Corp. to acquire certain assets of the C.J.
Our ON THE BORDER brand ("OTB"), which was acquired on December 14, 2020 as part of the acquisition of Truco, is a national brand of tortilla chips, salsa and queso. OTB is the #2 unflavored tortilla chip brand as of January 2, 2022.
Our On The Border brand ("OTB"), which was acquired in December 2020, is a national brand of tortilla chips, salsa and queso. OTB is the #2 unflavored tortilla chip brand as of January 1, 2023.
However, private label represented only approximately 5% of category retail sales in 2021, which was about flat compared to its share of retail sales in 2016. Historically, the salty snacks category has benefited from favorable competitive dynamics, including low private label penetration and category leaders who compete primarily via marketing and innovation.
However, private label represented only approximately 4.5% of category retail sales for the 52 weeks ended January 1, 2023, which has been about flat compared to its share of retail sales since 2016. Historically, the salty snacks category has benefited from favorable competitive dynamics, including low private label penetration and category leaders who compete primarily via marketing and innovation.
We utilize various buying strategies to mitigate the impact of changes in input prices, including fixed-price forward purchases as well as commodity hedging arrangements with third parties (particularly for energy, vegetable oils, wheat, and corn).
In addition to raw materials, we source energy and liquid fuels for our manufacturing facilities and in-house distribution assets. We utilize various buying strategies to mitigate the impact of changes in input prices, including fixed-price forward purchases as well as commodity hedging arrangements with third parties (particularly for energy, vegetable oils, wheat, and corn).
In the Natural channel, Boulder Canyon is the #2 potato chip brand while growing nearly 5% within the channel in 2021 and its “Canyon Cut” rippled avocado oil-based chip is the #1 selling potato chip item as of January 2, 2022.
In the Natural channel as defined by SPINS, LLC, Boulder Canyon is the #2 potato chip brand, growing 23% within the channel in 2022 and its “Canyon Cut” rippled avocado oil-based chip is the #1 selling potato chip item as of January 1, 2023.
We expect the ongoing shift from RSPs toward IOs to be substantially completed during fiscal year 2022. Additionally, we historically have reduced associate count and operating expenses in relation to integration initiatives associated with our recent acquisitions. Sustainability We recognize the importance of Environmental, Social and Governance ("ESG") issues for all stakeholders.
We expect to continue working on our ongoing transition from RSPs toward IOs in 2023. Additionally, we historically have reduced associate count and operating expenses in relation to integration initiatives associated with our acquisitions. Sustainability We recognize the importance of Environmental, Social and Governance ("ESG") issues for all stakeholders.
We believe this available capacity across our manufacturing footprint will enable us to leverage existing fixed costs to generate higher margins on incremental organic sales or acquired brands as well as generate potential future cost savings through consolidating our manufacturing footprint.
We believe this available capacity across our manufacturing footprint will enable us to leverage existing fixed costs to generate higher margins on incremental organic sales or acquired brands as well as generate potential future cost savings through consolidating our manufacturing footprint. Our manufacturing facilities are well-maintained, and we have a program to ensure appropriate maintenance capital expenditures are undertaken.
We expect to substantially complete our ongoing transition from RSPs toward IOs during the fiscal year 2022 (See “ Management’s Discussion and Analysis of Financial Condition and Results of Operations of Utz Brands Holdings — Recent Developments and Significant Items Affecting Comparability — Independent Operator Conversions ” for more details).
We expect to continue working on our ongoing transition from RSPs toward IOs in 2023 (See “Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations of Utz Brands Holdings — Recent Developments and Significant Items Affecting Comparability — Independent Operator Conversions ” for more details).
Environmental Protection Agency; and the Occupational Safety and Health Administration and similar state and local agencies. Under various statutes, these agencies, among other things, prescribe the requirements and establish the standards for quality and safety and regulate marketing and advertising to consumers.
Food and Drug Administration (“FDA”); the United States Department of Agriculture (“USDA”); the U.S. Environmental Protection Agency ("EPA"); and the Occupational Safety and Health Administration ("OSHA") and similar state and local agencies. Under various statutes, these agencies, among other things, prescribe the requirements and establish the standards for quality and safety and regulate marketing and advertising to consumers.
We believe our broad product assortment enables us to gain greater distribution and shelf space with our customers. Our in-house production capabilities across a range of products also enable us to rapidly respond to evolving consumer needs and preferences and to better create new innovative products to delight consumers.
Our in-house production capabilities across a range of products also enable us to rapidly respond to evolving consumer needs and preferences and to better create new innovative products to delight consumers.
Our principal ingredients are generally available from multiple suppliers, but became more difficult to source beginning in 2021 due to ongoing supply chain constraints. We do not source any of our top 10 inputs under any single-source arrangements. As such, we have been able to make satisfactory alternative arrangements in the event of this interruption of supply from our vendors.
Our principal ingredients are generally available from multiple suppliers, but became more difficult to source beginning in 2021 and continuing into 2022 due to ongoing supply chain constraints. We do not source any of our top 10 inputs under any single-source arrangements.
Our products are packaged in a variety of different sizes and configurations, ranging from individual packages to shareable bulk containers. We also sell certain third-party branded products through our distribution network. We believe our ability to produce a wide range of products differentiates us from some of our competitors whose businesses focus on a particular product type.
Our products are packaged in a variety of different sizes and configurations, ranging from individual packages to shareable bulk containers. We also sell certain third-party branded products through our distribution network.
As of January 2, 2022, we operate 17 manufacturing facilities with a broad range of capabilities, and our products are distributed nationally to grocery, mass, club, convenience, drug and other retailers through direct shipments, distributors, and more than 1,850 direct store delivery (“DSD”) routes.
As of January 1, 2023, we operate 16 manufacturing facilities with a broad range of capabilities, and our products are distributed nationally to grocery, mass, club, convenience, drug and other retailers through direct shipments, distributors, and approximately 2,100 direct store delivery (“DSD”) routes. Our business benefits from multiple opportunities to deliver attractive long-term profitable growth.
Our Foundation Brands include strong regional snacking brands, such as Golden Flake (excluding pork skins), Tim’s Cascade , Snyder of Berlin , “Dirty”, Herdez, Kitchen Cooked , Bachman , Jax and R.W. Garcia as well as our partner and private label brands.
Our Foundation Brands include strong regional snacking brands, such as Bachman ®, Golden Flake ® Chips and Cheese, Tim’s Cascade ® Snacks , Snyder of Berlin ®, " Dirty" Potato Chips®, and R.W. Garcia®, as well as other partner and private label brands.
We also license certain third-party brand names for use on our products, including the TGI Friday’s and Herdez trademarks. We use these trademarks in connection with the manufacturing, production, and distribution of snack products to be sold under the trademarked labels. Under the agreements governing our use of such trademarks, we are required to make guaranteed annual royalty payments.
We also license certain third-party brand names for use on our products, including the TGI Friday’s, HeluvaGood, Grillo’s Pickles, Yellowbird, and Mike's Hot Honey. We use these trademarks in connection with production and distribution of snack products to be sold under the trademarked labels.
Utz Peanut Butter Filled Pretzel Bites is proving to be a large and sustaining offering, with strong velocities and repeat rates. In just over a year Utz Peanut Butter Filled Pretzel Bites became the #1 branded peanut butter filled pretzel barrel at retail.
In particular, Utz Peanut Butter Filled Pretzel Bites is proving to be a large and sustaining offering, with strong velocities and repeat rates. Utz Peanut Butter Filled Pretzel Bites is the #1 branded peanut butter filled pretzel item at retail as of January 1, 2023, based on IRI Data.
We benefit from strong brand awareness and heritage in our Core Geographies, where we are the second largest provider of branded salty snacks based on retail sales. We have historically expanded our geographic reach, both organically and through acquisitions, in our Expansion and Emerging Geographies.
We have historically expanded the geographic reach of our distribution network from our Core Geographies, where we benefit from strong brand awareness and heritage to our Expansion and Emerging Geographies, where we have expanded both organically and through acquisitions.
As a result, we focus our investment spending and brand-building activities on Power Brands while managing Foundation Brands for cash flow generation to support investment in Power Brands and fund other corporate priorities. Our Power Brands are comprised of Utz, ON THE BORDER, Good Health, Boulder Canyon, Zapp’s, Hawaiian, Golden Flake pork skins , TGIF , and TORTIYAHS!.
As a result, we focus our investment spending and brand-building activities on Power Brands while managing Foundation Brands for cash flow generation to support investment in Power Brands and fund other corporate priorities.
Going forward, we intend to increase our investments in market research and other resources to generate more consumer insights and new product innovations. 7 We also utilize our flexible manufacturing and distribution platform to streamline the new product innovation process from idea conception through development and commercialization to market.
We also utilize our flexible manufacturing and distribution platform to streamline the new product innovation process from idea conception through development and commercialization to market.
Our company was founded in 1921 in Hanover, Pennsylvania, and benefits from nearly 100 years of brand awareness and heritage in the salty snacks industry. We are the second-largest producer of branded salty snacks in our Core Geographies, based on retail sales and we have historically expanded our geographic reach and product portfolio organically and through acquisitions.
We are the second-largest producer of branded salty snacks in our Core Geographies as of January 1, 2023, based on retail sales and we have historically expanded our geographic/distribution reach and product portfolio organically and through acquisitions.
In addition to this acquisition on December 6, 2021, the Company closed on an acquisition of a manufacturing facility of which RW Garcia was a tenant. The cost of the manufacturing facility was approximately $6.0 million. Brands Our business is managed and reported in one operating segment.
In addition to the RW Garcia acquisition on December 6, 2021, the Company closed on an acquisition of a manufacturing facility of which RW Garcia was a tenant. The cost of the manufacturing facility was approximately $6.0 million. During fiscal year 2022 the Company focused on increasing manufacturing and streamlining distribution.
Employee Headcount As of January 2, 2022, we employed 3,469 full-time associates and 272 part-time associates.
Employee Headcount As of January 1, 2023, we employed approximately 3,550 full-time associates and 250 part-time associates.
We strive to provide a safe working environment by having policies, procedures, and training programs in place to ensure associates understand and meet safety guidelines.
(based on self-reported data from our associates) were: Health and Safety The safety of our team members is a top priority. We strive to provide a safe working environment by having policies, procedures, and training programs in place to ensure that our associates understand and meet safety guidelines.
We also utilize several co-manufacturers for certain products, with the most significant being our OTB branded tortilla chips as well as branded salsa and queso. Distribution. We offer national distribution of our products through our flexible, hard-to-replicate distribution system that combines direct-to-warehouse, direct-to-store, distributor, and direct-to-consumer capabilities.
We also utilize several co-manufacturers for certain products, with the most significant being our OTB branded tortilla chips as well as branded salsa and queso.
We also recently unveiled a modernization of our well known Little Utz Girl, and procured a trademark registration for her. Depending upon the jurisdiction, trademarks are valid as long as they are used in the regular course of trade and/or their registrations are properly maintained.
Depending upon the jurisdiction, trademarks are valid as long as they are used in the regular course of trade and/or their registrations are properly maintained.
In particular, our brands have strong competitive positions across an assortment of popular salty snacks, including potato chips, tortilla chips, pretzels, cheese snacks, pub/party mixes, veggie snacks, and pork skins.
In particular, our brands have strong competitive positions across an assortment of popular salty snacks, including potato chips, tortilla chips, pretzels, cheese snacks, pub/party mixes, veggie snacks, and pork skins. Over the past several years, we have focused on strengthening our presence in certain salty snack sub-categories that we believe are highly synergistic to our existing business.
We also collaborate with third-party seasoning and flavor houses to understand the latest trends in consumer flavors and emerging consumer flavor preferences.
We also collaborate with third-party seasoning and flavor houses to understand the latest trends in consumer flavors and emerging consumer flavor preferences. Going forward, we intend to increase our investments in market research and other resources to generate more consumer insights and new product innovations.
Generally, producers of food products, including salty snacks, have been deemed “essential industries” by federal, state, and local governments and are exempt from certain COVID-19-related restrictions on business operations. Our strategic manufacturing capabilities and DSD distribution network have allowed us to effectively service increases in demand and be responsive to evolving market dynamics driven by changes in consumer behavior.
During period in which restrictions imposed in response to COVID-19 have been in place, generally, producers of food products, including salty snacks, have been deemed “essential industries” by federal, state, and local governments and are exempt from certain COVID-19-related restrictions on business operations.
Finally, given the importance of in-store presence, we have a dedicated graphics team that is able to quickly develop and implement new packaging designs, impactful point-of-sale materials, and retail-ready displays. Utz innovation is gaining momentum, contributing more to growth and remains a key focus area.
Finally, given the importance of in-store presence, we have a dedicated graphics team that is able to quickly develop and implement new packaging designs, impactful point-of-sale materials, and retail-ready displays. 10 Marketing, Advertising, and Consumer Engagement Our marketing strategy is focused on driving stronger consumer pull for, and building brand equity of, our Power Brands.
Importantly, as of January 2, 2022, we are the #2 brand platform in our Core Geographies representing nearly 9% of total salty snacks category retail sales.
Importantly, as of January 1, 2023, we are the #2 brand platform in our Core Geographies, representing nearly 8% of total salty snacks category retail sales based on IRI data. As of January 1, 2023, in our Core Geographies, we have the #2 position in pork skins and in pretzels with 18% and 16% of sub-category retail sales, respectively.
By collaborating with stakeholders, including associates, consumers, business partners, suppliers, stockholders and customers, we are taking the necessary steps to become a more sustainable company. Intellectual Property We own numerous domestic and foreign trademarks and other proprietary rights that are important to our business.
By collaborating with stakeholders, including associates, consumers, business partners, suppliers, stockholders and customers, we are taking the necessary steps to become a more sustainable company. We believe that in our stakeholders’ best interests, we place safety-focused, sustainability-minded, and transparent best practices at the heart of our operations.
Finally, we have historically engaged in certain cross-marketing and/or promotional activities with third parties, thereby increasing the visibility of our brands.
In addition, we license certain of our owned brands, including Utz, for use by third parties in certain food categories (such as frozen foods), however these arrangements do not materially impact our financial position. Finally, we have historically engaged in certain cross-marketing and/or promotional activities with third parties, thereby increasing the visibility of our brands.
To ensure we are continuing to foster a work environment that values all people, Utz has partnered with a nationally recognized consulting firm to aid in the development of a comprehensive diversity, equity, and inclusion strategy. Efforts will include recruiting, training, and leadership development focus area. Health and Safety The safety of our team members is a top priority.
To foster a work environment that values all people, Utz partnered with a nationally recognized consulting firm to help develop a comprehensive diversity, equity, and inclusion strategy, which includes various aspects of human capital management, including recruiting, training, and leadership development. 13 As of our latest ESG report, our associate demographics in the U.S.
We have historically benefited from long-term relationships with our key customers, having a sales relationship for more than 20 years on average across our top 15 retail customers. Our strong brand equities, enhanced innovation, and optimized consumer marketing spend should enable us to continue to expand distribution of our products both within existing customers and in under-penetrated retail channels.
Although orders are processed through purchase orders, as opposed to volume commitments, we have historically benefited from long-term relationships with our key customers, having a sales relationship for more than 20 years on average across our top 15 retail customers.
As of January 2, 2022 in our Core Geographies, we have the #1 position in pork skins with 24% of sub-category retail sales and the #2 positions in potato chips, pretzels and cheese snacks with 14%, 20% and 9% of sub-category retail sales, respectively.
We have the #3 position in potato chips, cheese snacks and tortilla chips with 12%, 7% and 4% of sub-category retail sales, respectively. As of January 1, 2023, we hold the #3 company position with in tortilla chips, with a 4% share, primarily driven by sales of our OTB-branded tortilla chips.
(“Inventure Foods”) acquisition in 2017, offers a line of premium BFY potato chips, including those made with olive or avocado oils.
Good Health , which we acquired in 2014, is positioned well with fun forms and flavors that appeal to the whole family. Boulder Canyon offers a line of premium BFY potato chips, including those made with olive or avocado oils.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAt the closing of the Business Combination, the Continuing Members sold Common Company Units for the cash consideration in the Business Combination and may in the future exchange their Common Company Units, together with the surrender and cancellation of an equal number of shares of Class V Common Stock, for shares of our Class A Common Stock (or cash) pursuant to the Third Amended and Restated Limited Liability Company Agreement, subject to certain conditions and transfer restrictions as set forth therein and in the Investor Rights Agreement dated August 28, 2020 (the “Investor Rights Agreement”), entered into between the Company, the Continuing Members, the Sponsor, the Founder Holders, Collier Creek's independent directors (together with the Sponsor and the Founder Holders, the “Sponsor Parties ” ) and the representative of the Sponsor (the “Sponsor Representative ” ) in connection with the Closing of the Business Combination.
Biggest changePursuant to the TRA, we are required to pay to Continuing Members and/or the exchanging holders of Common Company Units, as applicable, 85% of the tax savings that we realized as a result of increases in tax basis in UBH’s assets as a result of the sale of Common Company Units for the cash consideration in the Business Combination, the purchase and redemption of the common units and preferred units in the Continuing Members and the future exchange of the Common Company Units for shares of Class A Common Stock (or cash) pursuant to the Third Amended and Restated Limited Liability Company Agreement and certain other tax attributes of UBH and tax benefits related to entering into the TRA, including tax benefits attributable to payments under the TRA, and those payments may be substantial. 36 At the closing of the Business Combination, the Continuing Members sold Common Company Units for the cash consideration in the Business Combination and may in the future exchange their Common Company Units, together with the surrender and cancellation of an equal number of shares of Class V Common Stock, for shares of our Class A Common Stock (or cash) pursuant to the Third Amended and Restated Limited Liability Company Agreement, subject to certain conditions and transfer restrictions as set forth therein and in the Investor Rights Agreement dated August 28, 2020 (the “Investor Rights Agreement”), entered into between the Company, the Continuing Members, Collier Creek partners LLC, the sponsor of CCH (the “Sponsor”), the Founder Holders, Collier Creek's independent directors (together with the Sponsor and the Founder Holders, the “Sponsor Parties ” ) and the representative of the Sponsor (the “Sponsor Representative ” ) in connection with the Closing of the Business Combination.
The future success of our operations, including the achievement of our strategic objectives, depends on our ability, and the ability of third parties on which we rely to supply and to deliver our products, to identify, recruit, develop and retain qualified and talented individuals. As a result, any shortage of qualified labor could significantly adversely affect our business.
The future success of our operations, including the achievement of our strategic objectives, depends on our ability, and the ability of third parties on which we rely to supply and to deliver our products, to identify, recruit, develop and retain qualified and talented individuals. As a result, any shortage of qualified labor could significantly and adversely affect our business.
Among other things, the Certificate of Incorporation and Bylaws include provisions regarding: • A classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of the Company Board; • The ability of the Company Board to issue shares of preferred stock, including “blank check” preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • The limitation of the liability of, and the indemnification of, our directors and officers; • The right of the Company Board to elect a director to fill a vacancy created by the expansion of the Company Board or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on the Company Board; • The requirement that directors may only be removed from the Company Board for cause; • The requirement that a special meeting of stockholders may be called only by the Company Board, the chairman of the Company Board or our chief executive officer, which could delay the ability of stockholders to force consideration of a proposal or to take action, including the removal of directors; • Controlling the procedures for the conduct and scheduling of the Company Board and stockholder meetings; • The requirement for the affirmative vote of holders of (i) (a) at least 66 2∕3% or 80%, in case of certain provisions, or (b) a majority, in case of other provisions, of the voting power of all of the then outstanding shares of the voting stock, voting together as a single class, to amend, alter, change or repeal certain provisions of our Certificate of Incorporation, and (ii) (a) at least 66 2∕3%, in case of certain provisions, or (b) a majority, in case of other provisions, of the voting power of all of the then outstanding shares of the voting stock, voting together as a single class, to amend, alter, change or repeal certain provisions of our Bylaws, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in the Company Board and also may inhibit the ability of an acquirer to effect such amendments to facilitate an unsolicited takeover attempt; • The ability of the Company Board to amend the Bylaws, which may allow the Company Board to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the Bylaws to facilitate an unsolicited takeover attempt; and 36 • Advance notice procedures with which stockholders must comply to nominate candidates to the Company Board or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in the Company Board and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of the Company.
Among other things, the Certificate of Incorporation and Bylaws include provisions regarding: • A classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of the Company Board; • The ability of the Company Board to issue shares of preferred stock, including “blank check” preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • The limitation of the liability of, and the indemnification of, our directors and officers; • The right of the Company Board to elect a director to fill a vacancy created by the expansion of the Company Board or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on the Company Board; • The requirement that directors may only be removed from the Company Board for cause; • The requirement that a special meeting of stockholders may be called only by the Company Board, the chairman of the Company Board or our chief executive officer, which could delay the ability of stockholders to force consideration of a proposal or to take action, including the removal of directors; • Controlling the procedures for the conduct and scheduling of the Company Board and stockholder meetings; • The requirement for the affirmative vote of holders of (i) (a) at least 66 2∕3% or 80%, in case of certain provisions, or (b) a majority, in case of other provisions, of the voting power of all of the then outstanding shares of the voting stock, voting together as a single class, to amend, alter, change or repeal certain provisions of our Certificate of Incorporation, and (ii) (a) at least 66 2∕3%, in case of certain provisions, or (b) a majority, in case of other provisions, of the voting power of all of the then outstanding shares of the voting stock, voting together as a single class, to amend, alter, change or repeal certain provisions of our Bylaws, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in the Company Board and also may inhibit the ability of an acquirer to effect such amendments to facilitate an unsolicited takeover attempt; • The ability of the Company Board to amend the Bylaws, which may allow the Company Board to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the Bylaws to facilitate an unsolicited takeover attempt; and • Advance notice procedures with which stockholders must comply to nominate candidates to the Company Board or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in the Company Board and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of the Company.
The Certificate of Incorporation provides that, unless we consent in writing to the selection of an alternative forum, (i) any derivative action or proceeding brought on behalf of us, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our current or former directors, officers, other employees, agents or stockholders to us or our stockholders, or any claim for aiding and abetting such alleged breach, (iii) any action asserting a claim against us or any of our current or former directors, officers, other employees, agents or stockholders (a) arising pursuant to any provision of the DGCL, the Certificate of Incorporation (as it may be amended or restated) or the Bylaws or (b) as to which the DGCL confers jurisdiction on the Delaware Court of Chancery or (iv) any action asserting a claim against us or any of our current or former directors, officers, other employees, agents or stockholders governed by the internal affairs doctrine of the law of the State of Delaware shall, as to any action in the foregoing clauses (i) through (iv), to the fullest extent permitted by law, be solely and exclusively brought in the Delaware Court of Chancery; provided, however, that the foregoing shall not apply to any claim (a) as to which the Delaware Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Delaware Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), (b) which is vested in the exclusive jurisdiction of a court or forum other than the Delaware Court of Chancery, or (c) arising under federal securities laws, including the Securities Act of 1933 (the “Securities Act”) as to which the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the sole and exclusive forum.
The Certificate of Incorporation provides that, unless we consent in writing to the selection of an alternative forum, (i) any derivative action or proceeding brought on behalf of us, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our current or former directors, officers, other associates, agents or stockholders to us or our stockholders, or any claim for aiding and abetting such alleged breach, (iii) any action asserting a claim against us or any of our current or former directors, officers, other associates, agents or stockholders (a) arising pursuant to any provision of the DGCL, the Certificate of Incorporation (as it may be amended or restated) or the Bylaws or (b) as to which the DGCL confers jurisdiction on the Delaware Court of Chancery or (iv) any action asserting a claim against us or any of our current or former directors, officers, other associates, agents or stockholders governed by the internal affairs doctrine of the law of the State of Delaware shall, as to any action in the foregoing clauses (i) through (iv), to the fullest extent permitted by law, be solely and exclusively brought in the Delaware Court of Chancery; provided, however, that the foregoing shall not apply to any claim (a) as to which the Delaware Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Delaware Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), (b) which is vested in the exclusive jurisdiction of a court or forum other than the Delaware Court of Chancery, or (c) arising under federal securities laws, including the Securities Act of 1933 (the “Securities Act”) as to which the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the sole and exclusive forum.
In addition, increasing focus on climate change, deforestation, water conservation, animal welfare and human rights concerns and other risks associated with the global food system may lead to increased activism focusing on consumer goods companies, governmental intervention and consumer response, and could adversely affect our or our suppliers’ reputation and business and our ability to procure the materials we need to operate our business. 21 The raw materials and energy, including electricity, fuel and natural gas, that we use for the manufacturing, production and distribution of our products are largely commodities that are subject to price volatility and fluctuations in availability caused by many factors, including changes in global supply and demand, weather conditions (including any potential effects of climate change), fire, natural disasters, disease or pests, agricultural uncertainty, pandemics, epidemics or other outbreak of disease, governmental incentives and controls (including import/export restrictions, such as new or increased tariffs, sanctions, quotas or trade barriers), limited or sole sources of supply, political uncertainties, acts of terrorism, governmental instability or currency exchange rates.
In addition, increasing focus on climate change, deforestation, water conservation, animal welfare and human rights concerns and other risks associated with the global food system may lead to increased activism focusing on consumer goods companies, governmental intervention and consumer response, and could adversely affect our or our suppliers’ reputation and business and our ability to procure the materials we need to operate our business. 24 The raw materials and energy, including electricity, fuel and natural gas, that we use for the manufacturing, production and distribution of our products are largely commodities that are subject to price volatility and fluctuations in availability caused by many factors, including changes in global supply and demand, weather conditions (including any potential effects of climate change), fire, natural disasters, disease or pests, agricultural uncertainty, pandemics, epidemics or other outbreak of disease, governmental incentives and controls (including import/export restrictions, such as new or increased tariffs, sanctions, quotas or trade barriers), limited or sole sources of supply, political uncertainties, acts of terrorism, governmental instability or currency exchange rates.
Food and Drug Administration regulations and other applicable regulations); • Laws related to product labeling, including but not limited to California’s Proposition 65; • Advertising and marketing laws and practices; • Laws and programs restricting the sale and advertising of certain of our products; • Laws and programs aimed at reducing, restricting or eliminating ingredients present in certain of our products; • Laws and programs aimed at discouraging the consumption of products or ingredients or altering the package or portion size of certain of our products; • Increased regulatory scrutiny of, and increased litigation involving, product claims and concerns regarding the effects on consumers’ health from ingredients in, or attributes of, certain of our products; • Farming and environmental laws; • Taxation requirements, including the imposition or proposed imposition of new or increased taxes or other limitations on the sale of our products; • State consumer protection and disclosure laws; • Anti-corruption laws; • Laws regulating transportation, including the use of motor vehicles; • Employment and labor laws, including laws regulating employee or independent contractor classification; • Privacy laws; • Export control laws; • Laws regulating the price we may charge for our products; and • Competition or antitrust laws.
Food and Drug Administration regulations and other applicable regulations); • Laws related to product labeling, including but not limited to California’s Proposition 65; • Advertising and marketing laws and practices; • Laws and programs restricting the sale and advertising of certain of our products; • Laws and programs aimed at reducing, restricting or eliminating ingredients present in certain of our products; • Laws and programs aimed at discouraging the consumption of products or ingredients or altering the package or portion size of certain of our products; • Increased regulatory scrutiny of, and increased litigation involving, product claims and concerns regarding the effects on consumers’ health from ingredients in, or attributes of, certain of our products; • Farming and environmental laws; • Taxation requirements, including the imposition or proposed imposition of new or increased taxes or other limitations on the sale of our products; • State consumer protection and disclosure laws; • Anti-corruption laws; • Laws regulating transportation, including the use of motor vehicles; • Employment and labor laws, including laws regulating associate or independent contractor classification; • Privacy laws; • Export control laws; • Laws regulating the price we may charge for our products; and • Competition or antitrust laws.
Additional changes in the United States tax regime, including changes in how existing tax laws are interpreted or enforced, can adversely affect our business, financial condition or results of operations. 31 We are also subject to regular reviews, examinations and audits by the IRS and other taxing authorities with respect to income and non-income-based taxes.
Additional changes in the United States tax regime, including changes in how existing tax laws are interpreted or enforced, can adversely affect our business, financial condition or results of operations. We are also subject to regular reviews, examinations and audits by the IRS and other taxing authorities with respect to income and non-income-based taxes.
This in turn could have a negative impact on our financial condition and results of operations. In addition, the cost to remediate any damages to our information technology systems suffered as a result of a cyber-attack could be significant. 29 Improper use or misuse of social media may have an adverse effect on our business and financial results.
This in turn could have a negative impact on our financial condition and results of operations. In addition, the cost to remediate any damages to our information technology systems suffered as a result of a cyber-attack could be significant. Improper use or misuse of social media may have an adverse effect on our business and financial results.
In future years, we may experience pricing pressure from our customers due to such competition, which could have a material and adverse effect on our operating results. Changes in retail distribution arrangements can result in the temporary loss of retail shelf space and disrupt sales of food products, causing our sales to fall.
In future years, we may experience pricing pressure from our customers due to such competition, which could have a material and adverse effect on our operating results. Changes in retail distribution arrangements can result in the loss of retail shelf space and disrupt sales of food products, causing our sales to fall.
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in the Company Board or management. In addition, as a Delaware corporation, we will generally be subject to provisions of Delaware law, including the DGCL.
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in the Company Board or management. 39 In addition, as a Delaware corporation, we will generally be subject to provisions of Delaware law, including the DGCL.
In addition, while we currently maintain insurance coverage that is intended to address certain costs associated with aspects of our business, this insurance coverage, to the extent we utilize it, may not, depending on the specific facts and circumstances surrounding an incident, may be insufficient to cover the actual losses or the types of claims that arise from an incident, or the damage to our reputation or brands that may result from an incident. 23 Changes in the legal and regulatory environment could limit our business activities, increase our operating costs, reduce demand for our products or result in litigation.
In addition, while we currently maintain insurance coverage that is intended to address certain costs associated with aspects of our business, this insurance coverage, to the extent we utilize it, may not, depending on the specific facts and circumstances surrounding an incident, may be insufficient to cover the actual losses or the types of claims that arise from an incident, or the damage to our reputation or brands that may result from an incident. 26 Changes in the legal and regulatory environment could limit our business activities, increase our operating costs, reduce demand for our products or result in litigation.
The loss of any of these independent certifications, including for reasons outside of our control, could harm our business. 24 We also must comply with state rules and regulations, including Proposition 65 in California, which requires a specific warning on or relating to any product that contains a substance listed by the State of California as having been found to cause cancer or birth defects or other reproductive harm, unless the level of such substance in the product is below a safe harbor level established by the State of California.
The loss of any of these independent certifications, including for reasons outside of our control, could harm our business. 27 We also must comply with state rules and regulations, including Proposition 65 in California, which requires a specific warning on or relating to any product that contains a substance listed by the State of California as having been found to cause cancer or birth defects or other reproductive harm, unless the level of such substance in the product is below a safe harbor level established by the State of California.
In addition, litigation or one or more adverse rulings by courts or regulatory or governmental bodies regarding our DSD network, third-party distributor network or DTW system, including actions or decisions that could affect the independent contractor classifications of the IOs, or an adverse judgment against us for actions taken by the IOs could materially and negatively affect our financial condition, results of operations, cash flows, and ability to operate and conduct our business. 19 The evolution of e-commerce sales channels may adversely affect our business, financial condition or results of operations.
In addition, litigation or one or more adverse rulings by courts or regulatory or governmental bodies regarding our DSD network, third-party distributor network or DTW system, including actions or decisions that could affect the independent contractor classifications of the IOs, or an adverse judgment against us for actions taken by the IOs could materially and negatively affect our financial condition, results of operations, cash flows, and ability to operate and conduct our business. 22 The evolution of e-commerce sales channels may adversely affect our business, financial condition or results of operations.
Ports and other channels of entry may be closed or operate at only a portion of capacity, as workers may be prohibited or otherwise unable to report to work and means of transporting products within regions may be limited for the same reason. 22 Our operations, or those of suppliers and other members of our supply chain, or IOs, third-party distributors and other participants in our distribution channels may become limited in their ability to procure, distribute, or produce our products because of transport restrictions related to quarantines or travel bans.
Ports and other channels of entry may be closed or operate at only a portion of capacity, as workers may be prohibited or otherwise unable to report to work and means of transporting products within regions may be limited for the same reason. 25 Our operations, or those of suppliers and other members of our supply chain, or IOs, third-party distributors and other participants in our distribution channels may become limited in their ability to procure, distribute, or produce our products because of transport restrictions related to quarantines or travel bans.
Responding to litigation, claims, proceedings, inquiries, and investigations, even those that are ultimately non-meritorious, requires us to incur significant expense and devote significant resources, including the time and attention of our management, and may generate adverse publicity that damages our reputation or brand image, resulting in an adverse impact on our business, financial condition or results of operations. 25 We may be unable to successfully identify and execute or integrate acquisitions.
Responding to litigation, claims, proceedings, inquiries, and investigations, even those that are ultimately non-meritorious, requires us to incur significant expense and devote significant resources, including the time and attention of our management, and may generate adverse publicity that damages our reputation or brand image, resulting in an adverse impact on our business, financial condition or results of operations. 28 We may be unable to successfully identify and execute or integrate acquisitions.
In addition, we have periodically acquired other businesses or business assets and we plan to selectively pursue acquisitions in the future to continue to grow and increase our profitability.
We have periodically acquired other businesses or business assets and we plan to selectively pursue acquisitions in the future to continue to grow and increase our profitability.
Furthermore, our operations are governed by laws and regulations relating to workplace safety and worker health, which, among other things, regulate employee exposure to hazardous chemicals in the workplace. Any material costs incurred in connection with such liabilities or claims could have a material adverse effect on our business, results of operations and financial condition.
Furthermore, our operations are governed by laws and regulations relating to workplace safety and worker health, which, among other things, regulate associate exposure to hazardous chemicals in the workplace. Any material costs incurred in connection with such liabilities or claims could have a material adverse effect on our business, results of operations and financial condition.
In addition, negative publicity related to our environmental, social or governance practices could also impact our reputation with customers, consumers, IOs, third-party distributors, suppliers, vendors, employees and equityholders, among others. Costs associated with these potential actions, as well as the potential impact on our ability to sell our products, could negatively affect our operating results.
In addition, negative publicity related to our environmental, social or governance practices could also impact our reputation with customers, consumers, IOs, third-party distributors, suppliers, vendors, associates and equityholders, among others. Costs associated with these potential actions, as well as the potential impact on our ability to sell our products, could negatively affect our operating results.
These laws include employee classifications as exempt or non-exempt, minimum wage requirements, unemployment tax rates, workers’ compensation rates, overtime, family leave, safety standards, payroll taxes, citizenship requirements and other wage and benefit requirements for associates classified as non-exempt. Significant additional government regulations could materially and adversely affect our business, financial condition and operating results.
These laws include associate classifications as exempt or non-exempt, minimum wage requirements, unemployment tax rates, workers’ compensation rates, overtime, family leave, safety standards, payroll taxes, citizenship requirements and other wage and benefit requirements for associates classified as non-exempt. Significant additional government regulations could materially and adversely affect our business, financial condition and operating results.
Further, our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any securities litigation and shareholder activism. 38 We may not have sufficient funds to satisfy indemnification claims of our directors and executive officers. We agreed to indemnify our officers and directors to the fullest extent permitted by law.
Further, our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any securities litigation and shareholder activism. 41 We may not have sufficient funds to satisfy indemnification claims of our directors and executive officers. We agreed to indemnify our officers and directors to the fullest extent permitted by law.
Loss of consumers’ loyalty to our brands and the resulting decreased sales to consumers could have an adverse effect on our business and operating results. 14 Demand for our products may be adversely affected by changes in consumer preferences and tastes or if we are unable to innovate or market our products effectively.
Loss of consumers’ loyalty to our brands and the resulting decreased sales to consumers could have an adverse effect on our business and operating results. 17 Demand for our products may be adversely affected by changes in consumer preferences and tastes or if we are unable to innovate or market our products effectively.
Further, if our advertising or promotional efforts do not increase brand awareness or sales of our products, our expenses may increase, and our operating profit may be reduced. 17 We face competition in our business from private label, generic or store branded products which may result in price point pressures, leading to decreased demand for our products.
Further, if our advertising or promotional efforts do not increase brand awareness or sales of our products, our expenses may increase, and our operating profit may be reduced. 20 We face competition in our business from private label, generic or store branded products which may result in price point pressures, leading to decreased demand for our products.
In recent years we have expanded our consumer outreach and communications through use of various social media platforms. However, misuse of social media platforms by individuals, customers, consumers, competitors, or employees may result in unfavorable media attention which could negatively affect our business. Further, our competitors are increasingly using social media platforms to market and advertise products.
In recent years we have expanded our consumer outreach and communications through use of various social media platforms. However, misuse of social media platforms by individuals, customers, consumers, competitors, or associates may result in unfavorable media attention which could negatively affect our business. Further, our competitors are increasingly using social media platforms to market and advertise products.
The Certificate of Incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.
The Certificate of Incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other associates.
We have also registered up to 9,500,000 shares of Class A Common Stock that we may issue under the Utz Brands, Inc. 2020 Omnibus Equity Incentive Plan (the “2020 Plan”), 1,500,000 shares of Class A Common Stock that we may issue under the Utz Brands, Inc. 2021 Employee Stock Purchase Plan, and 1,557,941 shares of Class A Common Stock that we may issue under the Utz Quality Foods, LLC 2020 Long-Term Incentive Plan.
We have also registered up to 9,500,000 shares of Class A Common Stock that we may issue under the Utz Brands, Inc. 2020 Omnibus Equity Incentive Plan (as amended, the “2020 Plan”), 1,500,000 shares of Class A Common Stock that we may issue under the Utz Brands, Inc. 2021 Employee Stock Purchase Plan, and 1,557,941 shares of Class A Common Stock that we may issue under the Utz Quality Foods, LLC 2020 Long-Term Incentive Plan.
Pursuant to the Investor Rights Agreement that we entered into with the Sponsor, certain founder members of the Sponsor and their family members (the “Founder Holders”), the Sponsor Representative, the Continuing Members and the independent directors of CCH at the closing of the Business Combination in connection with the Business Combination, we agreed to nominate five designees by each of the Sponsor and the Continuing Members, respectively, to serve on the Company Board for so long as each of them and their respective affiliates and specified family members beneficially own certain specified percentages of certain economic interests in us and UBH held as of the closing of the Business Combination, without duplication.
Pursuant to the Investor Rights Agreement that we entered into with the Sponsor (as amended, the “Investor Rights Agreement”), certain founder members of the Sponsor and their family members (the “Founder Holders”), the Sponsor Representative, the Continuing Members and the independent directors of CCH at the closing of the Business Combination in connection with the Business Combination, we agreed to nominate five designees by each of the Sponsor and the Continuing Members, respectively, to serve on the Company Board for so long as each of them and their respective affiliates and specified family members beneficially own certain specified percentages of certain economic interests in us and UBH held as of the closing of the Business Combination, without duplication.
Instability in financial markets may impact our ability, or increase the cost, to enter into new credit agreements in the future.
Instability in financial markets may also impact our ability, or increase the cost, to enter into new credit agreements in the future.
Failure of our systems, including failures due to cyber-attacks that would prevent the ability of systems to function as intended, could cause transaction errors, loss of customers and sales, and could have negative consequences to our company, our employees and those with whom we do business.
Failure of our systems, including failures due to cyber-attacks that would prevent the ability of systems to function as intended, could cause transaction errors, loss of customers and sales, and could have negative consequences to our company, our associates and those with whom we do business.
Risks Related to Our Business Our gross profit margins may be impacted by a variety of factors, including but not limited to variations in raw materials pricing, retail customer requirements and mix, sales velocities and required promotional support.
Risks Related to Our Business Our gross profit margins may be impacted by a variety of factors, including but not limited to variations in raw materials pricing, retail customer ordering patterns, requirements and mix, sales velocities and required promotional support.
Unanticipated fluctuations in product requirements by our customers could result in fluctuations in our results from quarter to quarter. 16 We operate in the highly competitive snack food industry, which may reduce our ability to sell our products to our customers or consumers if we are unable to compete effectively.
Unanticipated fluctuations in product requirements by our customers could result in fluctuations in our results from quarter to quarter. 19 We operate in the highly competitive snack food industry, which may reduce our ability to sell our products to our customers or consumers if we are unable to compete effectively.
Inflationary pressures and any shortages in the labor market could increase labor costs, which could have a material adverse effect on our consolidated operating results or financial condition. Our labor costs include the cost of providing employee benefits, including health and welfare, and severance benefits.
Inflationary pressures and any shortages in the labor market could increase labor costs, which could have a material adverse effect on our consolidated operating results or financial condition. Our labor costs include the cost of providing associate benefits, including health and welfare, and severance benefits.
These consumers could cease purchasing our products for any number of reasons, some of which are beyond our control, including changing consumer trends, negative publicity regarding our brand, real or perceived quality or health issues with our products, a change in consumers’ perception of “better for you” brands or other specialty brands, or the availability of premium-branded or lower-priced alternative snack products, or for no reason at all.
These consumers could cease purchasing our products for any number of reasons, some of which are beyond our control, including changing consumer trends, negative publicity regarding our brand, real or perceived quality or health issues with our products, a change in consumers’ perception of BFY brands or other specialty brands, or the availability of premium-branded or lower-priced alternative snack products, or for no reason at all.
Shifts in consumer spending could result in increased pressure from competitors or customers that may require us to increase promotional spending or reduce the prices of some of our products, or limit our ability to increase or maintain prices, which could lower our revenue and profitability.
Shifts in consumer spending could result in increased pressure from competitors or customers that my require us to increase promotional spending or reduce the prices of some of our products, or limit our ability to increase or maintain prices, which could lower our revenue and profitability.
Existing tax laws in the United States have been and could in the future be subject to significant change. For example, in December 2017, the Tax Cuts and Jobs Act (the “TCJ Act”), was signed into law in the United States.
(the “Kennedy Acquisition”). Existing tax laws in the United States have been and could in the future be subject to significant change. For example, in December 2017, the Tax Cuts and Jobs Act (the “TCJ Act”), was signed into law in the United States.
Our success depends on our ability to respond to consumer trends, including increasing concerns of consumers regarding health and wellness, obesity, product attributes and ingredients, as demonstrated through the “better-for-you” movement in our industry. In addition, changes in product category consumption or consumer demographics could result in reduced demand for our products.
Our success depends on our ability to respond to consumer trends, including increasing concerns of consumers regarding health and wellness, obesity, product attributes and ingredients, as demonstrated through the BFY movement in our industry. In addition, changes in product category consumption or consumer demographics could result in reduced demand for our products.
In 2021, we have identified and subsequently remediated a material weakness in our internal control over financial reporting; however, in the future if we are unable to implement and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports, and the market price of our common stock may be seriously harmed.
In fiscal year 2021, we identified and subsequently remediated a material weakness in our internal control over financial reporting; however, in the future if we are unable to implement and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports, and the market price of our common stock may be seriously harmed.
Failure to successfully negotiate collective bargaining agreements, or strikes or work stoppages, could cause our business to suffer. Some of our employees are covered by collective bargaining agreements, and other employees may seek to be covered by collective bargaining agreements.
Failure to successfully negotiate collective bargaining agreements, or strikes or work stoppages, could cause our business to suffer. Some of our associates are covered by collective bargaining agreements, and other associates may seek to be covered by collective bargaining agreements.
In addition, we have granted certain registration rights in respect of all shares of Class A Common Stock, including shares that are obtainable in exchange for common units of UBH held by the Continuing Members. 32 Potential sales of shares of Class A Common Stock described above or the perception of such sales may depress the market price of our Class A Common Stock.
In addition, we have granted certain registration rights in respect of shares of Class A Common Stock that are obtainable in exchange for common units of UBH held by the Continuing Members. Potential sales of shares of Class A Common Stock described above or the perception of such sales may depress the market price of our Class A Common Stock.
Our direct-to-warehouse delivery network system relies on a significant number of brokers, wholesalers and logistics companies. Such reliance could affect our ability to effectively and profitably distribute and market products, maintain existing markets and expand business into other geographic markets.
Our DTW delivery network system relies on a significant number of brokers, wholesalers and logistics companies. Such reliance could affect our ability to effectively and profitably distribute and market products, maintain existing markets and expand business into other geographic markets.
Our continued success also is dependent on product innovation, such as new flavors and formats, as well as the introduction of “better-for-you” products in response to evolving consumer preference. In order to successfully compete within our industry, we must maintain a robust pipeline of new products, and effective advertising and promotional campaigns, marketing programs and product packaging.
Our continued success also is dependent on product innovation, such as new flavors and formats, as well as the introduction of BFY products in response to evolving consumer preference. In order to successfully compete within our industry, we must maintain a robust pipeline of new products, and effective advertising and promotional campaigns, marketing programs and product packaging.
We have purchased stop-loss coverage from third parties for certain employee healthcare plans, which limits our exposure above the amounts we have self-insured.
We have purchased stop-loss coverage from third parties for certain associate healthcare plans, which limits our exposure above the amounts we have self-insured.
Moreover, the TRA provides that, in the event that (i) we exercise our early termination rights under the TRA, (ii) certain changes of control of the Company or UBH occur (as described in the Third Amended and Restated Limited Liability Company Agreement), (iii) we, in certain circumstances, fail to make a payment required to be made pursuant to the TRA by its final payment date, which non-payment continues until the later of 30 days following receipt by us of written notice thereof and 60 days following such final payment date or (iv) we materially breach any of our material obligations under the TRA other than as described in the foregoing clause (iii), which breach continues without cure for 30 days following receipt by us of written notice thereof and written notice of acceleration is received by us thereafter (except that in the case that the TRA is rejected in a case commenced under bankruptcy laws, no written notice of acceleration is required), in the case of clauses (iii) and (iv), unless certain liquidity exceptions apply, our obligations under the TRA will accelerate and we will be required to make a lump-sum cash payment to the Continuing Members and/or other applicable parties to the TRA equal to the present value of all forecasted future payments that would have otherwise been made under the TRA, which lump-sum payment would be based on certain assumptions, including those relating to our future taxable income.
As a result, in certain circumstances we could make payments under the TRA in excess of our actual income or franchise tax savings, which could materially impair our financial condition. 37 Moreover, the TRA provides that, in the event that (i) we exercise our early termination rights under the TRA, (ii) certain changes of control of the Company or UBH occur (as described in the Third Amended and Restated Limited Liability Company Agreement), (iii) we, in certain circumstances, fail to make a payment required to be made pursuant to the TRA by its final payment date, which non-payment continues until the later of 30 days following receipt by us of written notice thereof and 60 days following such final payment date or (iv) we materially breach any of our material obligations under the TRA other than as described in the foregoing clause (iii), which breach continues without cure for 30 days following receipt by us of written notice thereof and written notice of acceleration is received by us thereafter (except that in the case that the TRA is rejected in a case commenced under bankruptcy laws, no written notice of acceleration is required), in the case of clauses (iii) and (iv), unless certain liquidity exceptions apply, our obligations under the TRA will accelerate and we will be required to make a lump-sum cash payment to the Continuing Members and/or other applicable parties to the TRA equal to the present value of all forecasted future payments that would have otherwise been made under the TRA, which lump-sum payment would be based on certain assumptions, including those relating to our future taxable income.
In addition, even when acquisitions, such as the acquisition of Inventure Foods, Kennedy, Truco, Vitner's, Festida, and RW Garcia, are completed, integration of acquired entities and business lines can involve significant difficulties, such as failure to achieve financial or operating objectives with respect to an acquisition, strain on our personnel, systems and operational and managerial controls and procedures, the need to modify systems or to add management resources, difficulties in the integration and retention of customers or personnel and the integration and effective deployment of operations or technologies, amortization of acquired assets (which would reduce future reported earnings), possible adverse short-term effects on cash flows or operating results, diversion of management’s attention from the operations of our business, integrating personnel with diverse backgrounds and organizational cultures, coordinating sales and marketing functions and failure to obtain and retain key personnel of an acquired business.
In addition, even when acquisitions are completed, integration of acquired entities and business lines can involve significant difficulties, such as failure to achieve financial or operating objectives with respect to an acquisition, strain on our personnel, systems and operational and managerial controls and procedures, the need to modify systems or to add management resources, difficulties in the integration and retention of customers or personnel and the integration and effective deployment of operations or technologies, amortization of acquired assets (which would reduce future reported earnings), possible adverse short-term effects on cash flows or operating results, diversion of management’s attention from the operations of our business, integrating personnel with diverse backgrounds and organizational cultures, coordinating sales and marketing functions and failure to obtain and retain key personnel of an acquired business.
Associate recruitment, development and retention efforts that we or such third parties undertake may not be successful, which could result in a shortage of qualified individuals in future periods. Any such shortage could decrease our ability to effectively produce and deliver product and to achieve our strategic objectives.
Associate recruitment, development and retention efforts that we or such third parties undertake may not be successful, which could result in a shortage of qualified individuals in future periods. Any such shortage could decrease our ability to effectively produce and deliver our products to our customers and consumers, and to achieve our strategic objectives.
If we are unable to fully offset such cost increases, our financial results could be materially adversely affected. Our results could be adversely impacted as a result of increased labor and employee-related expenses.
If we are unable to fully offset such cost increases, our financial results could be materially adversely affected. 23 Our results could be adversely impacted as a result of increased labor and associate-related expenses.
The annual costs of benefits vary with increased costs of health care and the outcome of collectively-bargained wage and benefit agreements. Various federal and state labor laws govern our relationships with our associates and affect operating costs.
The annual costs of benefits vary with increased costs of health care and the outcome of, in certain locations, collectively-bargained wage and benefit agreements. Various federal and state labor laws govern our relationships with our associates and affect operating costs.
The occurrence of any of these factors could result in increased expense or a significant decrease in sales volume through the DTW system and harm our business and financial results. 18 Our direct-store-delivery network system and regional third-party distributor network relies on a significant number of independent operators and third-party distributors, and such reliance could affect our ability to effectively and profitably distribute and market products, maintain existing markets and expand business into other geographic markets.
The occurrence of any of these factors could result in increased expense or a significant decrease in sales volume through the DTW system and harm our business and financial results. 21 Our DSD network system and regional third-party distributor network relies on a significant number of independent operators and third-party distributors, and such reliance could affect our ability to effectively and profitably distribute and market products, maintain existing markets and expand business into other geographic markets.
Our ability to compete may also be dependent on the availability of product category-appropriate snack aisles at our retail customers’ locations and whether our products are placed in the appropriate snack aisle, such as the “better-for-you” snack food aisle or in the traditional snack food aisle.
Our ability to compete may also be dependent on the availability of product category-appropriate snack aisles at our retail customers’ locations and whether our products are placed in the appropriate snack aisle, such as the BFY snack food aisle or in the traditional snack food aisle.
An increase in tax rates would also cause a corresponding increase in the Company’s Tax Receivable Agreement (“TRA ” ) liability as the Company is obligated to share 85% of the cash tax savings that are attributable to its increased tax basis in the UBH partnership assets per the Business Combination, future exchanges of UBH units for UBI stock by the Continuing Members, and annual TRA Payments, as well as the tax basis step-up that occurred in connection with the Kennedy Acquisition.
An increase in tax rates would also cause a corresponding increase in the Company’s Tax Receivable Agreement (“TRA ” ) liability as the Company is obligated to share 85% of the cash tax savings that are attributable to its increased tax basis in the UBH partnership assets per the Business Combination, future exchanges of UBH units for UBI stock by the Continuing Members, and annual TRA Payments, as well as the tax basis step-up that occurred in connection with the acquisition of Kennedy Endeavors, LLC (“Kennedy”), the DSD snacks business of Conagra Brands, Inc.
Any litigation or disputes regarding intellectual property may be costly and time-consuming and may divert the attention of our management and key personnel from our business operations. We also may be subject to significant damages or injunctions against development, launch and sale of certain products. Any of these occurrences may harm our business and financial results.
Any litigation or disputes regarding intellectual property may be costly and time-consuming and may divert the attention of our management and key personnel from our business operations. We also may be subject to significant damages or injunctions against development, launch and sale of certain products.
Our DTW network system relies on a significant number of brokers, wholesalers and logistics companies to deliver our products to approximately 350 retailer distribution centers as of the end of our 2021 fiscal year. The ability to maintain a DTW system depends on a number of factors, many of which are outside of our control.
Our DTW network system relies on a significant number of brokers, wholesalers and logistics companies to deliver our products to approximately 1,487 retailer distribution centers as of the end of our 2022 fiscal year. The ability to maintain a DTW system depends on a number of factors, many of which are outside of our control.
Pandemics, epidemics or other disease outbreaks, such as COVID-19, may change or disrupt consumption and trade patterns, supply chains, and production processes, which could materially affect our operations and results of operations. Pandemics, epidemics or other disease outbreaks, such as COVID-19, could significantly change consumption patterns for our products.
Pandemics, epidemics or other disease outbreaks may change or disrupt consumption and trade patterns, supply chains, and production processes, which could materially affect our operations and results of operations. Pandemics, epidemics or other disease outbreaks could significantly change consumption patterns for our products.
We have experienced operational challenges to our production facilities and logistics networks, shortage of labor and impacts from increases in prices of packaging materials and commodities, all of which are increasing costs company-wide. In response to these inflationary costs, we began to notify our customers of our plans to institute price increases for our products.
We have experienced operational challenges to our production facilities and logistics networks, shortage of labor and impacts from increases in prices of packaging materials and commodities, all of which are increasing costs company-wide. In response to these inflationary costs, we have instituted price increases for our products.
The recovery from the COVID-19 pandemic and the current economic climate is increasing labor costs, commodity costs and logistical costs which has adversely affected our business operations and results of operations and may continue to do so in the future. Our efforts to raise prices may not be successful at offsetting these cost increases and may have other adverse effects.
Labor costs, commodity costs and logistical costs are increasing in the current economic climate, which has adversely affected our business operations and results of operations and may continue to do so in the future. Our efforts to raise prices may not be successful at offsetting these cost increases and may have other adverse effects.
We compete in that market principally on the basis of product taste and quality, but also brand recognition and loyalty, price, marketing, advertising and the ability to satisfy specific consumer dietary needs against numerous multinational, regional and local companies, as well as emerging companies, primarily in the “better-for-you” product segment.
We compete in that market principally on the basis of product taste and quality, but also brand recognition and loyalty, price, marketing, advertising and the ability to satisfy specific consumer dietary needs against numerous multinational, regional and local companies, as well as emerging companies, most markedly in the BFY product segment.
The net carrying value of goodwill represents the fair value of acquired businesses in excess of identifiable assets and liabilities, and the net carrying value of other intangibles represents the fair value of trademarks, customer relationships, route intangibles and other acquired intangibles. Pursuant to U.S.
The net carrying value of goodwill represents the fair value of acquired businesses in excess of identifiable assets and liabilities, and the net carrying value of other intangibles represents the fair value of trademarks, customer relationships, route intangibles and other acquired intangibles.
Should the competitive dynamic change in our industry (which could impact our margins through forces including but not limited to requiring us to alter our pricing strategy, offering a greater percentage of lower profit margin products in our overall product mix, or requiring additional promotional activity), raw materials prices increase dramatically, or any of our customer relationships or relationships with our IOs and third-party distributors change materially, then we may not be able to continue to operate at our current margins.
Should the competitive dynamic change in our industry (which could impact our margins through forces including but not limited to requiring us to alter our pricing strategy, offering a greater percentage of lower profit margin products in our overall product mix, or requiring additional promotional activity), the prices we pay for raw materials, energy or other inputs increase dramatically due to interest rate or market condition changes or other reasons, or any of our customer relationships or relationships with our IOs and third-party distributors change materially, then we may not be able to continue to operate at our current margins.
In addition, we compete with emerging companies, primarily in the “better-for-you” product segment, some of which may provide innovative or trendier snack foods.
In addition, we compete with emerging companies, primarily in the BFY product segment, some of which may provide innovative or trendier snack foods.
An increasing focus on “better for you” products and other specialty products in the marketplace will likely increase these competitive pressures within the category in future periods.
An increasing focus on BFY products and other specialty products in the marketplace will likely increase these competitive pressures within the category in future periods.
Economic and political pressures to increase tax revenues in jurisdictions in which we operate, or the adoption of new or reformed tax legislation or regulation, may make resolving tax disputes more difficult and the final resolution of tax audits and any related litigation can differ from our historical provisions and accruals, resulting in an adverse impact on our business, financial condition or results of operations.
Economic and political pressures to increase tax revenues in jurisdictions in which we operate, or the adoption of new or reformed tax legislation or regulation, may make resolving tax disputes more difficult and the final resolution of tax audits and any related litigation can differ from our historical provisions and accruals, resulting in an adverse impact on our business, financial condition or results of operations. 34 The imposition or proposed imposition of new or increased taxes aimed at our products can adversely affect our business, financial condition or results of operations.
We may also lose the service of key personnel and significant portions of our workforce for extended periods of time due to pandemics, epidemics or other disease outbreaks. 26 Our ability to be successful following the Business Combination is also dependent upon the efforts of the board of directors of the Company (the “Company Board”) and key personnel to operate a public company.
We may also lose the service of key personnel and significant portions of our workforce for extended periods of time due to pandemics, epidemics or other disease outbreaks. 29 Our ability to be successful is also dependent upon the efforts of the board of directors of the Company Board and key personnel to oversee and operate a public company.
We are a holding company and our only material asset after the Closing of the Business Combination are our interest in UBH, and we are accordingly dependent upon distributions made by our subsidiaries to pay taxes, make payments under the TRA and pay dividends.
We are a holding company and our only material asset is our interest in UBH, and we are accordingly dependent upon distributions made by our subsidiaries to pay taxes, make payments under the TRA and pay dividends.
We will have no obligation to distribute such cash (or other available cash other than any declared dividend) to our stockholders. 33 Dividends on our Class A Common Stock, if any, will be paid at the discretion of the Company Board, which will consider, among other things, our available cash, available borrowings and other funds legally available therefor, taking into account the retention of any amounts necessary to satisfy our obligations that will not be reimbursed by UBH, including taxes and amounts payable under the TRA and any restrictions in then applicable bank financing agreements.
Dividends on our Class A Common Stock, if any, will be paid at the discretion of the Company Board, which will consider, among other things, our available cash, available borrowings and other funds legally available therefor, taking into account the retention of any amounts necessary to satisfy our obligations that will not be reimbursed by UBH, including taxes and amounts payable under the TRA and any restrictions in then applicable bank financing agreements.
Furthermore, our future obligation to make payments under the TRA could make it a less attractive target for an acquisition, particularly in the case of an acquirer that cannot use some or all of the tax benefits that may be deemed realized under the TRA. 34 In certain cases, payments under the TRA may exceed the actual tax benefits we realize or be accelerated.
Furthermore, our future obligation to make payments under the TRA could make it a less attractive target for an acquisition, particularly in the case of an acquirer that cannot use some or all of the tax benefits that may be deemed realized under the TRA.
Any such laws or regulations enacted in the future, or any changes in how existing laws or regulations will be enforced, administered or interpreted, may lead to an increase in compliance costs, cause us to change the way we operate or expose us to additional risk of liabilities and claims, which could have a material adverse effect on our business, results of operations and financial condition. 30 We are subject to increasing focus on Environmental, Social and Governance (“ESG”) issues, including those related to climate change.
Any such laws or regulations enacted in the future, or any changes in how existing laws or regulations will be enforced, administered or interpreted, may lead to an increase in compliance costs, cause us to change the way we operate or expose us to additional risk of liabilities and claims, which could have a material adverse effect on our business, results of operations and financial condition.
Even if we do obtain shelf space or preferable shelf placement for any of our brands, our new and existing products may fail to achieve the sales expectations set by our retail customers, potentially causing these retailers to remove our products from the shelf.
In addition, unattractive shelf placement and pricing may put us at a disadvantage to our competitors. Even if we do obtain shelf space or preferable shelf placement for any of our brands, our new and existing products may fail to achieve the sales expectations set by our retail customers, potentially causing these retailers to remove our products from the shelf.
Negative publicity related to these types of concerns, or related to product contamination or product tampering, whether valid or not and which may not be in our control, could decrease demand for our products or cause production and delivery disruptions.
Issues related to the quality and safety of our products, ingredients or packaging could jeopardize our image and reputation. Negative publicity related to these types of concerns, or related to product contamination or product tampering, whether valid or not and which may not be in our control, could decrease demand for our products or cause production and delivery disruptions.
Many aspects of our business have been, and may continue to be, directly affected by volatile commodity costs and other inflationary pressures. Our input costs began to increase significantly beginning in the latter part of fiscal year 2021, and we expect input cost inflation to continue into fiscal year 2022.
Many aspects of our business have been, and may continue to be, directly affected by volatile commodity costs and other market inflationary pressures. Our input costs increased significantly in fiscal year 2021 and fiscal year 2022, and we expect input cost inflation to continue in fiscal year 2023.
We cannot assure you that we will be able to successfully implement our growth strategy and continue to maintain growth in our sales.
We cannot assure you that we will be able to successfully implement our growth strategy and continue to maintain growth in our sales. If we fail to implement our growth strategy, our sales and profitability may be adversely affected.
Alternatively, if a court were to find this provision of the Certificate of Incorporation inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of our management and board of directors.
Alternatively, if a court were to find this provision of the Certificate of Incorporation inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of our management and board of directors. 40 Certain of our significant stockholders and Utz Brands Holdings members whose interests may differ from those of our other stockholders will have the ability to significantly influence our business and management.
Accordingly, we will be required to pay income taxes on our allocable share of any net taxable income of UBH.
Instead, taxable income will be allocated to holders of Common Company Units. Accordingly, we will be required to pay income taxes on our allocable share of any net taxable income of UBH.
Risks Related to the Ownership of our Securities Resales of shares of our Class A Common Stock could cause the market price of our Class A Common Stock to drop significantly, even if our business is doing well. There may be a large number of shares of Class A Common Stock sold in the market in the near future.
Risks Related to the Ownership of our Securities Resales of shares of our Class A Common Stock could cause the market price of our Class A Common Stock to drop significantly, even if our business is doing well.
If we are unable to comply with covenants in the agreements, commitments by the lenders thereunder may be terminated and the repayment of our indebtedness may be accelerated. Changes in interest rates may adversely affect our earnings and/or cash flows.
If we are unable to comply with covenants in the agreements, commitments by the lenders thereunder may be terminated and the repayment of our indebtedness may be accelerated.
The Certificate of Incorporation does not limit the ability of the successors to the Sponsor to compete with us. The successors to the Sponsor, or its successors, and each of their respective affiliates engage in a broad spectrum of activities, including investments in the financial services and technology industries.
The successors to the Sponsor, or its successors, and each of their respective affiliates engage in a broad spectrum of activities, including investments in the financial services and technology industries.
Although we devote significant resources to meet this goal, we may not be able to continue to develop and launch successful new products or variants of existing products, or to effectively execute advertising and promotional campaigns and marketing programs. We must expend resources to create consumer awareness, build brand loyalty and generate interest in our products.
Although we devote significant resources to meet this goal, we may not be able to continue to develop and launch successful new products or variants of existing products, or to effectively execute advertising and promotional campaigns and marketing programs.
However, these consumers are under no obligation to continue to repeatedly purchase our products and could stop or materially reduce purchasing our products at any time.
We believe this purchasing pattern is indicative of loyalty to our brands. However, these consumers are under no obligation to continue to repeatedly purchase our products and could stop or materially reduce purchasing our products at any time.
In addition, under-performance of new product launches may damage overall brand credibility with customers and consumers. Further, new products may not achieve success in the marketplace, due to lack of demand, failure to meet consumer tastes or otherwise. If we are unsuccessful in our product innovation efforts and demand for our products declines, our business would be negatively affected.
In addition, under-performance of new product launches may damage overall brand credibility with customers and consumers. Further, new products may not achieve success in the marketplace, due to lack of demand, failure to meet consumer tastes or otherwise.
Significant changes in our stock price or number of Private Placement Warrants outstanding may adversely affect our net income (loss) in our consolidated statements of operations and comprehensive income (loss).
Significant changes in our stock price or number of Private Placement Warrants outstanding may adversely affect our net income (loss) in our consolidated statements of operations and comprehensive income (loss). Our Private Placement Warrants may have an adverse effect on the market price of our Class A Common Stock.
If any action the subject matter of which is within the scope of the forum provisions is filed in a court other than a court located within the State of Delaware (a “foreign action”) in the name of any stockholder, such stockholder shall be deemed to have consented to: (x) the personal jurisdiction of the state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce the forum provisions (an “enforcement action”); and (y) having service of process made upon such stockholder in any such enforcement action by service upon such stockholder’s counsel in the foreign action as agent for such stockholder. 37 This choice-of-forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, stockholders, agents or other employees, which may discourage such lawsuits.
If any action the subject matter of which is within the scope of the forum provisions is filed in a court other than a court located within the State of Delaware (a “foreign action”) in the name of any stockholder, such stockholder shall be deemed to have consented to: (x) the personal jurisdiction of the state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce the forum provisions (an “enforcement action”); and (y) having service of process made upon such stockholder in any such enforcement action by service upon such stockholder’s counsel in the foreign action as agent for such stockholder.
If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, our share price or trading volume could decline. While we expect research analyst coverage, if no analysts cover us, or cease coverage of us, the market price and volume for our Class A Common Stock could be adversely affected.
While we expect research analyst coverage, if no analysts cover us, or cease coverage of us, the market price and volume for our Class A Common Stock could be adversely affected.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeIn addition, we own other corporate office space in Hanover, Pennsylvania, including 1040 High Street with 16,000 square feet of office space, 240 Kindig Lane with 8,000 square feet of office space, and 350 Kindig Lane with 6,000 square feet of office space. 40 We operate 17 principal manufacturing sites located in Algona, Washington; Goodyear, Arizona; Farmington, Illinois; Bluffton, Indiana; Fitchburg, Massachusetts; Wilkes-Barre, Pennsylvania; Lititz, Pennsylvania; Hanover, Pennsylvania; Berlin, Pennsylvania; Birmingham, Alabama; Gramercy, Louisiana; Grand Rapids, Michigan; Lincolnton, North Carolina; and Las Vegas, Nevada.
Biggest changeWe operate 16 principal manufacturing sites located in Algona, Washington; Goodyear, Arizona; Bluffton, Indiana; Fitchburg, Massachusetts; Wilkes-Barre, Pennsylvania; Lititz, Pennsylvania; Hanover, Pennsylvania; Berlin, Pennsylvania; Birmingham, Alabama; Grand Rapids, Michigan; Lincolnton, North Carolina; Kings Mountain, North Carolina; and Las Vegas, Nevada. We also operate 23 owned warehousing and distribution centers across the United States.
In total, we own approximately 40 properties in the United States that include manufacturing locations, warehouses, and office locations. We lease approximately 150 properties in the United States, which include warehouse locations, offices and small storage bins. We believe that our properties, taken as a whole, are generally well maintained and are adequate for our current and foreseeable business needs.
We lease approximately 161 properties in the United States, which include warehouse locations, offices and small storage bins. We believe that our properties, taken as a whole, are generally well maintained and are adequate for our current and foreseeable business needs.
We also operate 23 owned warehousing and distribution centers across the United States. These facilities supplement the warehousing and distribution capabilities co-located at our manufacturing facilities to ensure cost efficient delivery and timely access to products by our customers and DSD distributors.
These facilities supplement the warehousing and distribution capabilities co-located at our manufacturing facilities to ensure cost efficient delivery and timely access to products by our customers and DSD distributors. In total, we own approximately 39 properties in the United States that include manufacturing locations, warehouses, and office locations.
Though we believe that our facilities are sufficient to meet our current needs, we believe that suitable additional space will be available as and when needed to maintain and support our ongoing business needs. During 2021, a storm damaged our manufacturing facility in Gramercy, Louisiana causing it to cease operations until clean-up and repairs are completed.
Though we believe that our facilities are sufficient to meet our current needs, we believe that suitable additional space will be available as and when needed to maintain and support our ongoing business needs.
Removed
We evaluated the facility for impairment and determined it was not material and damages and certain out-of-pocket costs would be covered by our insurance carrier.
Added
In addition, we own other corporate office spaces in Hanover, Pennsylvania, including 1040 High Street with 16,000 square feet of office space, 240 Kindig Lane with 8,000 square feet of office space, and 350 Kindig Lane with 6,000 square feet of office space.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe performance graph and table shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act of 1933 or the Exchange Act. *Assumes $100 was invested on November 26, 2018, the day on which our Class A Common Stock commenced trading on the NYSE (which, prior to our domestication to a Delaware corporation in connection with the Business Combination, were referred to Class A Ordinary Shares). 42 Item 6. [Reserved]
Biggest changeThe performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act or the Exchange Act. 44 *Assumes $100 was invested on November 26, 2018, the day on which our Class A Common Stock commenced trading on the NYSE under the ticker symbol CCH.
The stock performance graph and table assume an initial investment of $100 on November 26, 2018, and that all dividends of the S&P 500 Index and S&P Packaged Food & Meats Index, were reinvested. The performance graph and table are not intended to be indicative of future performance.
The stock performance graph and table assume an initial investment of $100 on November 26, 2018, and that all dividends of the S&P 500 Index and S&P 1500 Packaged Food & Meats Index, were reinvested. The performance graph and table are not intended to be indicative of future performance.
In addition, under Delaware law, our Board of Directors may declare dividends only to the extent of our surplus (which is defined as total assets at fair market value minus total liabilities, minus statutory capital) or, if there is no surplus, out of our net profits for the then-current and/or immediately preceding fiscal year.
In addition, under Delaware law, our Company Board may declare dividends only to the extent of our surplus (which is defined as total assets at fair market value minus total liabilities, minus statutory capital) or, if there is no surplus, out of our net profits for the then-current and/or immediately preceding fiscal year.
The declaration and payment of dividends is also at the discretion of our Board of Director and depends on various factors including our results of operations, financial condition, cash requirements, prospects and other factors deemed relevant by our Board of Directors.
The declaration and payment of dividends is also at the discretion of our Company Board and depends on various factors including our results of operations, financial condition, cash requirements, prospects and other factors deemed relevant by our Company Board.
Performance The following graph compares the total shareholder return from November 26, 2018, the date on which our Class A common shares commenced trading on the NYSE, through January 2, 2022 of (i) our Class A Common Stock, (ii) the Standard and Poor's 500 Stock Index (“S&P 500 Index”) and (iii) the Standard and Poor’s Packaged Foods & Meats Index.
Performance The following graph compares the total shareholder return from November 26, 2018, the date on which our Class A common shares commenced trading on the NYSE, through January 1, 2023, of (i) our Class A Common Stock, (ii) the Standard and Poor's 500 Stock Index (“S&P 500 Index”) and (iii) the Standard and Poor’s ("S&P") 1500 Packaged Foods & Meats Index.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our Class A Common Stock is traded on NYSE under the symbol “UTZ”. As of March 1, 2022, the closing price for our Class A Common Stock was $14.61.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our Class A Common Stock is traded on NYSE under the symbol “UTZ”. As of February 27, 2023, the closing price for our Class A Common Stock was $16.74.
Dividends Our Board of Directors has adopted a dividend policy, pursuant to which we will make quarterly dividends on the Class A Common Stock, to the extent our Board of Directors determines that we have available cash, available borrowings and other funds legally available therefor, taking into account the retention of any amounts necessary to satisfy our obligations that will not be reimbursed by UBH, taxes and obligations under the TRA, and any restrictions contained in any applicable bank financing agreement by which we or our subsidiaries are bound.
The number of record holders does not include beneficial owners of our securities whose shares are held in the names of various security brokers, dealers, and registered clearing agencies. 43 Dividends Our Board of Directors has adopted a dividend policy, pursuant to which we will make quarterly dividends on the Class A Common Stock, to the extent our Company Board determines that we have available cash, available borrowings and other funds legally available therefor, taking into account the retention of any amounts necessary to satisfy our obligations that will not be reimbursed by UBH, taxes and obligations under the TRA, and any restrictions contained in any applicable bank financing agreement by which we or our subsidiaries are bound.
The annual dividend rate on our Common Stock in 2021 was $.204 per share. 41 For 2022, our Board of Directors expects to declare and pay a dividend on the outstanding shares of Class A Common Stock in an aggregate amount of no less than $0.216 per share of Class A Common Stock, per annum.
For 2023, our Company Board expects to declare and pay a dividend on the outstanding shares of Class A Common Stock in an aggregate amount of no less than $0.228 per share of Class A Common Stock, per annum.
We declared $15.6 million in cash dividends on our Class A Common Stock in 2021 and $7.2 million in 2020.
We declared $17.6 million in cash dividends on our Class A Common Stock in 2022 and $15.7 million in 2021. The annual dividend rate on our Common Stock in 2022 was $0.219 per share.
Holders As of January 2, 2022, there were 30 holders of record of our Class A Common Stock and two holders of record of our Class V Common Stock. The number of record holders does not include beneficial owners of our securities whose shares are held in the names of various security brokers, dealers, and registered clearing agencies.
Holders As of January 1, 2023, there were 27 holders of record of our Class A Common Stock and two holders of record of our Class V Common Stock.
Added
Prior to our domestication to a Delaware corporation in connection with the Business Combination on August 28, 2020, these shares were referred to as Class A Ordinary Shares. Subsequent to the Business Combination, our Class A Common Stock was traded under the ticker symbol UTZ on the NYSE. Item 6. [Reserved]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeGAAP. 47 Successor Predecessor For the year ended January 2, 2022 From August 29, 2020 through January 3, 2021 From December 30, 2019 through August 28, 2020 For the year ended December 29, 2019 Net sales $ 1,180,713 $ 325,648 $ 638,662 $ 768,228 Cost of goods sold 796,804 219,977 411,595 514,430 Gross profit 383,909 105,671 227,067 253,798 Selling, general and administrative expenses Selling 249,352 63,616 131,579 163,589 General and administrative 125,855 43,871 64,050 64,723 Total selling, general and administrative expenses 375,207 107,487 195,629 228,312 Gain on sale of assets Gain on disposal of property, plant and equipment, net 1,133 109 79 6,028 Gain on sale of routes, net 731 749 1,264 7,232 Total gain on sale of assets 1,864 858 1,343 13,260 Income (loss) from operations 10,566 (958) 32,781 38,746 Other income (expense) Interest expense (34,708) (13,301) (26,659) (48,388) Other income (expense) 3,551 (2,058) 1,271 (576) Gain (loss) on remeasurement of warrant liability 36,675 (91,851) — — Other income (expense), net 5,518 (107,210) (25,388) (48,964) Income (loss) before income taxes 16,084 (108,168) 7,393 (10,218) Income tax expense (benefit) 8,086 (267) 3,973 3,146 Net income (loss) 7,998 (107,901) 3,420 (13,364) Net loss (income) attributable to noncontrolling interest 12,557 7,971 — (2,808) Net income (loss) attributable to controlling interest $ 20,555 $ (99,930) $ 3,420 $ (16,172) 48 Successor Predecessor Non-GAAP Combined (in thousands) From August 29, 2020 through January 3, 2021 From December 30, 2019 through August 28, 2020 For the year ended January 3, 2021 Net sales $ 325,648 $ 638,662 $ 964,310 Cost of goods sold 219,977 411,595 631,572 Gross profit 105,671 227,067 332,738 Selling, general and administrative expenses Selling 63,616 131,579 195,195 General and administrative 43,871 64,050 107,921 Total selling, general and administrative expenses 107,487 195,629 303,116 Gain on sale of assets Gain on disposal of property, plant and equipment 109 79 188 Gain on sale of routes, net 749 1,264 2,013 Total gain on sale of assets 858 1,343 2,201 (Loss) income from operations (958) 32,781 31,823 Other (expense) income Interest expense (13,301) (26,659) (39,960) Other (expense) income (2,058) 1,271 (787) Loss on remeasurement of warrant liabilities (91,851) — (91,851) Other (expense) income, net (107,210) (25,388) (132,598) (Loss) income before taxes (108,168) 7,393 (100,775) Income tax (benefit) expense (267) 3,973 3,706 Net (loss) income (107,901) 3,420 (104,481) Net loss attributable to noncontrolling interest 7,971 — 7,971 Net (loss) income attributable to controlling interest $ (99,930) $ 3,420 $ (96,510) 49 Successor Non-GAAP Combined Predecessor (in thousands) For the year ended January 2, 2022 For the year ended January 3, 2021 For the year ended December 29, 2019 Net sales $ 1,180,713 $ 964,310 $ 768,228 Cost of goods sold 796,804 631,572 514,430 Gross profit 383,909 332,738 253,798 Selling, general and administrative expenses Selling 249,352 195,195 163,589 General and administrative 125,855 107,921 64,723 Total selling, general and administrative expenses 375,207 303,116 228,312 Gain on sale of assets Gain on disposal of property, plant and equipment 1,133 188 6,028 Gain on sale of routes, net 731 2,013 7,232 Total gain on sale of assets 1,864 2,201 13,260 Income from operations 10,566 31,823 38,746 Other income (expense) Interest expense (34,708) (39,960) (48,388) Other (expense) income 3,551 (787) (576) Loss on remeasurement of warrant liability 36,675 (91,851) — Other income (expense), net 5,518 (132,598) (48,964) Income (loss) before taxes 16,084 (100,775) (10,218) Income tax expense 8,086 3,706 3,146 Net income (loss) 7,998 (104,481) (13,364) Net loss (income) attributable to noncontrolling interest 12,557 7,971 (2,808) Net income (loss) attributable to controlling interest $ 20,555 $ (96,510) $ (16,172) 52 week Year Ended January 2, 2022 (Successor) versus 53 week Year Ended January 3, 2021 (Successor and Predecessor) Net sales Net sales were $1,180.7 million for the year ended January 2, 2022 and $325.6 million for the Successor period August 29, 2020 through January 3, 2021 and $638.7 million for the Predecessor period December 30, 2019 through August 28, 2020.
Biggest changeFor the year ended January 1, 2023 For the year ended January 2, 2022 Net sales $ 1,408,401 $ 1,180,713 Cost of goods sold 959,344 796,804 Gross profit 449,057 383,909 Selling, distribution and administrative expenses Selling and distribution 294,061 249,352 Administrative 150,343 125,855 Total selling, distribution, and administrative expenses 444,404 375,207 Gain on sale of assets, net 691 1,864 Income (loss) from operations 5,344 10,566 Other (expense) income Interest expense (44,424) (34,708) Other income (expense) 400 3,551 Gain (loss) on remeasurement of warrant liability 720 36,675 Other (expense) income, net (43,304) 5,518 (Loss) income before income taxes (37,960) 16,084 Income tax (benefit) expense (23,919) 8,086 Net (loss) income (14,041) 7,998 Net loss attributable to noncontrolling interest 13,649 12,557 Net (loss) income attributable to controlling interest $ (392) $ 20,555 49 52 week Year Ended January 1, 2023 versus 52 week Year Ended January 2, 2022 Net sales Net sales were $1,408.4 million for the fiscal year ended January 1, 2023 and $1,180.7 million for the fiscal year ended January 2, 2022.
Our fiscal quarters are comprised of thirteen weeks each, except for fifty-three-week fiscal periods for the which the fourth quarter is comprised of fourteen weeks, and end on the thirteenth Sunday of each quarter (fourteenth Sunday of the fourth quarter, when applicable). Overview We are a leading United States manufacturer of branded salty snacks.
Our fiscal quarters are comprised of thirteen weeks each, except for fifty-three-week fiscal periods for which the fourth quarter is comprised of fourteen weeks, and end on the thirteenth Sunday of each quarter (fourteenth Sunday of the fourth quarter, when applicable). Overview We are a leading United States manufacturer of branded salty snacks.
We produce a broad offering of salty snacks, including potato chips, tortilla chips, pretzels, cheese snacks, veggie snacks, pork skins, veggie snacks, pub/party mixes, and other snacks.
We produce a broad offering of salty snacks, including potato chips, tortilla chips, pretzels, cheese snacks, veggie snacks, pork skins, pub/party mixes, and other snacks.
EBITDA, Adjusted EBITDA, and Further Adjusted EBITDA We define EBITDA as Net Income before Interest, Income Taxes, and Depreciation and Amortization. We define Adjusted EBITDA as EBITDA further adjusted to exclude certain non-cash items, such as accruals for long-term incentive programs, hedging and purchase commitments adjustments, and asset impairments; Acquisition and Integration Costs; Business Transformation Initiatives; and Financing-Related Costs.
EBITDA and Adjusted EBITDA We define EBITDA as Net Income before Interest, Income Taxes, and Depreciation and Amortization. We define Adjusted EBITDA as EBITDA further adjusted to exclude certain non-cash items, such as accruals for long-term incentive programs, hedging and purchase commitments adjustments, and asset impairments; Acquisition and Integration Costs; Business Transformation Initiatives; and Financing-Related Costs.
(4) Business Transformation Initiatives – This adjustment is related to consultancy, professional, and legal fees incurred for specific initiatives and structural changes to the business that do not reflect the cost of normal business operations.
(4) Business Transformation Initiatives Adjustment – This adjustment is related to consultancy, professional, and legal fees incurred for specific initiatives and structural changes to the business that do not reflect the cost of normal business operations.
Deferred fees associated with the term loans under the January 2017 credit agreement were fully expensed during 2017 and other deferred financing fees were derecognized as a result of the Business Combination as described in the Note 1 " Operations and Summary of Significant Accounting Policies" and Note 2. "Acquisitions".
Deferred fees associated with the term loans under the January 2017 credit agreement were fully expensed during 2017 and other deferred financing fees were derecognized as a result of the Business Combination as described in Note 1 " Operations and Summary of Significant Accounting Policies" and Note 2. "Acquisitions".
Finite-lived intangible assets are tested for impairment only when management has determined that potential impairment indicators are present. Goodwill and other indefinite-lived intangible assets (including trade names, master distribution rights and Company owned routes) are not amortized but are tested for impairment at least annually and whenever events or circumstances change that indicate impairment may have occurred.
Finite-lived intangible assets are tested for impairment only when management has determined that potential impairment indicators are present. Goodwill and other indefinite-lived intangible assets (including trade names, trademarks, master distribution rights and Company owned routes) are not amortized but are tested for impairment at least annually and whenever events or circumstances change that indicate impairment may have occurred.
We test goodwill for impairment at the reporting unit level. As we have early adopted Accounting Standards Update 2017-04, simplifying the Test for Goodwill Impairment, we will record an impairment charge based on the excess of a reporting unit’s carrying amount over our fair value.
We test goodwill for impairment at the reporting unit level. As we have adopted Accounting Standards Update 2017-04, simplifying the Test for Goodwill Impairment, we will record an impairment charge based on the excess of a reporting unit’s carrying amount over our fair value.
Separately, on October 21, 2019, the Company entered into a Senior Secured First Lien Floating Rate Note (the “Secured First Lien Note”) in a principal amount of $125.0 million. Proceeds from the Secured First Lien Note were used primarily to finance the Kennedy Acquisition.
Separately, on October 21, 2019, the Company entered into a Senior Secured First Lien Floating Rate Note (the "Secured First Lien Note”) in a principal amount of $125.0 million. Proceeds from the Secured First Lien Note were used primarily to finance the Kennedy Acquisition.
Due to the structure of the transactions, they did not qualify for sale accounting treatment and the Company has recorded the notes payable obligation owed by the IOs to the financial institution on its books; the corresponding notes receivable also remained on the Company’s books.
Due to the structure of these transactions, they did not qualify for sale accounting treatment and the Company has recorded the notes payable obligation owed by the IOs to the financial institution on its books; the corresponding notes receivable also remained on the Company’s books.
Conversions also impact our balance sheet resulting in cash proceeds to us as a result of selling the route to an IO, or by creating notes receivable related to the sale of the routes. 46 Controls and Procedures Prior to the consummation of the Business Combination, we were not required to comply with the SEC’s rules implementing Section 404 of the Sarbanes-Oxley Act and were therefore not required in connection with periods ended prior to the consummation of the Business Combination to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose.
Conversions also impact our balance sheet resulting in cash proceeds to us as a result of selling the route to an IO, or by creating notes receivable related to the sale of the routes. 48 Controls and Procedures Prior to the consummation of the Business Combination, we were not required to comply with the SEC’s rules implementing Section 404 of the Sarbanes-Oxley Act and were therefore not required in connection with periods ended prior to the consummation of the Business Combination to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose.
Operating Costs – Our operating costs include raw materials, labor, manufacturing overhead, selling, distribution, general and administrative expenses. We manage these expenses through annual cost saving and productivity initiatives, sourcing and hedging programs, pricing actions, refinancing and tax optimization.
Operating Costs – Our operating costs include raw materials, labor, manufacturing overhead, selling, distribution, and administrative expenses. We manage these expenses through annual cost saving and productivity initiatives, sourcing and hedging programs, pricing actions, refinancing and tax optimization.
The proceeds of the Term Loans were used to refinance the Company’s January 2017 credit facility and fund the acquisition of Inventure Foods and the repurchase of the predecessor membership units held by a minority investor.
The proceeds of the Term Loans were used to refinance the Company’s January 2017 credit facility and fund the acquisition of Inventure Foods, Inc. and the repurchase of the predecessor membership units held by a minority investor.
On April 1, 2020, the ABL facility was amended to increase the credit limit up to $116.0 million and to extend the maturity through August 22, 2024. On December 18, 2020, the ABL facility was amended to increase the credit limit up to $161.0 million.
On April 1, 2020, the ABL facility was amended to increase the credit limit up to $116.0 million and to extend the maturity through August 22, 2024. On December 18, 2020, the ABL facility was amended to further increase the credit limit up to $161.0 million.
On January 20, 2021, the Company entered into Amendment No. 2 to the Credit Agreement ("Amendment No. 2") which provided additional operating flexibility and revisions to certain restrictive covenants.
On January 20, 2021, the Company entered into Amendment No. 2 to the Bridge Credit Agreement ("Amendment No. 2") which provided additional operating flexibility and revisions to certain restrictive covenants.
Finance fees allocated to the First Lien Term Loan and the Second Lien Term Loan were $10.7 million and $4.1 million, respectively, which are presented net within “non-current portion of debt” on the consolidated balance sheets for the Predecessor periods. Deferred fees are amortized ratably over the respective lives of each term loan.
Finance fees allocated to the First Lien Term Loan and the Second Lien Term Loan were $10.7 million and $4.1 million, respectively, which were presented net within "non-current portion of debt” on the consolidated balance sheets for the Predecessor periods. Deferred fees are amortized ratably over the respective lives of each term loan.
As of January 3, 2021, the outstanding balance of the Bridge Credit Agreement was $370.0 million, with $120.0 million being repaid from the redemption of the Company's warrants. Commitment fees and deferred financing costs on the Bridge Credit Agreement totaled $7.2 million, of which $2.6 million remained on the books as of January 3, 2021.
As of January 3, 2021, the outstanding balance of the Bridge Credit Agreement was $370.0 million, with $120.0 million being repaid from the exercise of the Company's warrants. Commitment fees and deferred financing costs on the Bridge Credit Agreement totaled $7.2 million, of which $2.6 million remained on the books as of January 3, 2021.
As we convert a large number of routes in a year, there is a meaningful decrease in the selling, general and administrative costs that we previously incurred on RSPs and a corresponding increase in discounts paid to IOs to cover their costs to distribute our product.
As we convert a large number of routes in a year, there is a meaningful decrease in the selling, distribution and administrative costs that we previously incurred on RSPs and a corresponding increase in discounts paid to IOs to cover their costs to distribute our product.
Revolving Credit Facility On November 21, 2017, UBH entered into an asset based revolving credit facility (as amended, the “ABL facility”) in an initial aggregate principal amount of $100.0 million. The ABL facility was set to expire on the fifth anniversary of closing, or November 21, 2022.
Revolving Credit Facility On November 21, 2017, UBH entered into an asset based revolving credit facility (as amended, the "ABL facility") in an initial aggregate principal amount of $100.0 million. The ABL facility was set to expire on the fifth anniversary of closing, or November 21, 2022.
The Company paid the aggregate cash purchase price of approximately $25.2 million which was funded from current cash-on-hand. 45 On May 10, 2021, the Company announced that its subsidiary, UQF entered into a definitive agreement with Great Lakes Festida Holdings, Inc. to acquire all assets including real estate located in Grand Rapids, Michigan related to the operations of Festida Foods ("Festida Foods acquisition" or "acquisition of Festida Foods"), a manufacturer of tortilla chips, corn chips, and pellet snacks, and the largest manufacturer of tortilla chips for the Company's ON THE BORDER® brand.
The Company paid the aggregate cash purchase price of approximately $25.2 million which was funded from current cash-on-hand. 47 On May 11, 2021, the Company announced that its subsidiary, UQF entered into a definitive agreement with Great Lakes Festida Holdings, Inc. to acquire all assets including real estate located in Grand Rapids, Michigan related to the operations of Festida Foods ("Festida Foods acquisition" or "acquisition of Festida Foods"), a manufacturer of tortilla chips, corn chips, and pellet snacks, and the largest manufacturer of tortilla chips for the Company's ON THE BORDER® brand.
The CARES Act is an approximately $2 trillion emergency economic stimulus package in response to the Coronavirus outbreak, which among other things contains numerous income tax provisions. Some of these tax provisions are effective retroactively for years ending before the date of enactment. We deferred $7.8 million of payroll tax deposits per the CARES Act.
The CARES Act is an approximately $2 trillion emergency economic stimulus package in response to the COVID-19 outbreak, which among other things contains numerous income tax provisions. Some of these tax provisions are effective retroactively for years ending before the date of enactment. We deferred $7.8 million of payroll tax deposits per the CARES Act.
Additionally, we maintain ongoing efforts led by our project management office, or PMO, to expand our profitability, including implementing significant reductions to our operating cost structure in both supply chain and overhead costs. Taxes – On March 27, 2020, The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted which includes various tax provisions with retroactive effect.
Additionally, we maintain ongoing efforts led by our project management office (“PMO”), to expand our profitability, including implementing significant reductions to our operating cost structure in both supply chain and overhead costs. 46 Taxes – On March 27, 2020, The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted which includes various tax provisions with retroactive effect.
The Secured First Lien Note requires quarterly interest payments, with a repayment of principal on the maturity date of November 21, 2024. On December 14, 2020, the Company entered into a Bridge Credit Agreement with a syndicate of banks, led by Bank of America, N.A. (the “Bridge Credit Agreement”).
The Secured First Lien Note requires quarterly interest payments, with a repayment of principal on the maturity date of November 21, 2024. Term Loans On December 14, 2020, the Company entered into a Bridge Credit Agreement with a syndicate of banks, led by Bank of America, N.A. (the "Bridge Credit Agreement”).
Our fiscal year 2021 qualitative analysis concluded that Goodwill and all but one of our intangible assets is not more likely than not to be impaired.
Our fiscal year 2022 qualitative analysis concluded that Goodwill and all but one of our intangible assets is not more likely than not to be impaired.
Pursuant to the terms of Amendment No. 2, the Company raised $720 million in aggregate principal of Term Loan B ("Term Loan B") which bears interest at LIBOR plus 3.00%, and extended the maturity of the Credit Agreement to January 20, 2028.
Pursuant to the terms of Amendment No. 2, the Company raised $720 million in aggregate principal of Term Loan B ("Term Loan B") which bore interest at LIBOR plus 3.00%, and extended the maturity of the Bridge Credit Agreement to January 20, 2028.
In 2021, acquisition related costs included $9.5 million of expense related to reclaiming distribution rights through purchases and terminations, in addition to $7.1 million of expense for the three acquired entities and the evaluation of other potential acquisition targets. Additionally in 2021, we incurred $10.2 million of expenses related to restructuring and integration costs related to recent acquisitions.
In fiscal year 2021, acquisition related costs included $9.5 million of expense related to reclaiming distribution rights through purchases and terminations, in addition to $7.1 million of expense for the three acquired entities and the evaluation of other potential acquisition targets. Additionally in 2021, we incurred $10.4 million of expenses related to restructuring and integration costs related to recent acquisitions.
During fiscal 2021, the Company sold an additional $11.8 million of notes receivable from IOs on its books for $12.5 million in a series of transactions to a financial institution.
During fiscal year 2021, the Company sold an additional $11.8 million of notes receivable from IOs on its books for $12.5 million in a series of transactions to a financial institution. During fiscal year 2022, the Company sold an additional $5.0 million of notes receivable from IOs on its books for $5.0 million to a financial institution.
(6) (Gain) or loss related to the changes in the remeasurement of warrant liabilities are not expected to be settled in cash, and when exercised would result in a cash inflow to the Company with the Warrants converting to Class A Common Stock with the liability being extinguished and the fair value of the Warrants at the time of exercise being recorded as an increase to equity.
(6) Gains and losses related to the changes in the remeasurement of warrant liabilities are not expected to be settled in cash, and when exercised would result in a cash inflow to the Company with the Warrants converting to Class A Common Stock with the liability being extinguished and the fair value of the Warrants at the time of exercise being recorded as an increase to equity.
On January 20, 2021, the Bridge Credit Agreement was repaid in full by the refinancing of term debt. In connection with Amendment No. 2 to the Credit Agreement, and a $12.0 million repayment in the first quarter of 2021, the outstanding balance of $370.0 million was repaid in full and the Bridge Credit Agreement was terminated.
On January 20, 2021, the Bridge Credit Agreement was repaid in full by the refinancing of term debt. In connection with Amendment No. 2 (as defined below), and a $12.0 million repayment in the first quarter of 2021, the outstanding balance of $370.0 million was repaid in full and the Bridge Credit Agreement was terminated.
COVID-19 – In March 2020, the World Health Organization declared that COVID-19 constituted a “Public Health Emergency of International Concern” and later characterized it as a “pandemic”. In response, we have taken necessary preventive actions and continue to implement safety measures to protect our employees who are working on and off site.
COVID-19 – In March 2020, the World Health Organization declared that COVID-19 constituted a “Public Health Emergency of International Concern” and later characterized it as a “pandemic”. In response, we took necessary preventive actions and continue to implement safety measures to protect our associates who are working on and off site.
We have begun to use interest rate swaps to manage our exposure to interest rate changes, which can drive cash flow variability related to our debt. Refer to Note 8. "Long-Term Debt" and Note 9.
We have used interest rate swaps to manage our exposure to interest rate changes, which can drive cash flow variability related to our debt. Refer to Note 8. "Long-Term Debt" and Note 9.
Both the fixed and floating payment streams are based on a notional amount of $250 million.
Both the fixed and floating payment streams were based on a notional amount of $250 million.
For the qualitative analysis performed, which took place on the first day of the fourth quarter, we have taken into consideration all the events and circumstances listed in FASB ASC 350, Intangibles—Goodwill and Other, in addition to other entity-specific factors that have taken place from the period of the business combination, which assessed goodwill, on August 28, 2020.
For the qualitative analysis performed, which took place on the first day of the fourth quarter, we have taken into consideration all the events and circumstances listed in Financial Accounting Standards Board (“FASB”) ASC 350, Intangibles—Goodwill and Other, in addition to other entity-specific factors that have taken place from the period of the Business Combination, which assessed goodwill, on August 28, 2020.
("RW Garcia") to acquire the equity of RW Garcia., an artisan maker of high-quality organic tortilla chips, crackers, and corn chips (RW Garcia acquisition"). The Company closed on this transaction on December 6, 2021, with the purchase price of approximately $58.3 million funded in part from a draw on the Company's line of credit and cash on hand.
("RW Garcia") to acquire the equity of RW Garcia., an artisan maker of high-quality organic tortilla chips, crackers, and corn chips (RW Garcia acquisition"). The Company closed on the RW Garcia acquisition on December 6, 2021, with the purchase price of approximately $57.9 million funded in part from a draw on the Company's line of credit and cash on hand.
We record intangible assets for distribution routes that we purchase based on the payment that we make to acquire the route and record the purchased distribution routes as indefinite-lived intangible assets under Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 350, Intangibles – Goodwill and Other.
We record intangible assets for distribution routes that we purchase based on the payment that we make to acquire the route and record the purchased distribution routes as indefinite-lived intangible assets under Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 350, Intangibles – Goodwill and Other. The indefinite lived intangible assets are subject to annual impairment testing.
We are required to provide an annual management report on the effectiveness of our internal control over financial reporting beginning with our annual report for the fiscal year ending January 3, 2021.
We were required to provide an annual management report on the effectiveness of our internal control over financial reporting beginning with our annual report for the fiscal year ended January 3, 2021.
Accordingly, the Company has the ability to recover substantially all of the outstanding loan value upon default. The Company guarantees loans made to IOs by M&T Bank for the purchase of routes.
These 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. The Company guarantees loans made to IOs by M&T Bank for the purchase of routes.
Our Foundation brands are comprised of several regional brands, including Bachman ®, Golden Flake ® Chips and Cheese, Tim’s Cascade ® Snacks , Snyder of Berlin ®, and “ Dirty ” Potato Chips®, R.W. Garcia® and selected licensed brands such as Herdez ® as well as other partner and private label brands.
Our Foundation brands are comprised of several regional brands, including Bachman ®, Golden Flake ® Chips and Cheese, Tim’s Cascade ® Snacks , Snyder of Berlin ®, and " Dirty" Potato Chips®, R.W. Garcia®, as well as other partner and private label brands.
Interest costs and related penalties related to unrecognized tax benefits are required to be calculated, if applicable. Our policy is to classify assessments, if any, for tax related interest as interest expense and penalties as selling, general and administrative expenses. As of January 2, 2022, and January 3, 2021, no liability for unrecognized tax benefits was required to be reported.
Interest costs and related penalties related to unrecognized tax benefits are required to be calculated, if applicable. Our policy is to classify assessments, if any, for tax related interest as interest expense and penalties as selling, distribution and administrative expenses. As of January 1, 2023, and January 2, 2022, no liability for unrecognized tax benefits was required to be reported.
We continue to evaluate the impact of the CARES Act; however, we believe it is unlikely to have a material effect on our consolidated financial position, results of operations, and cash flow. Financing Costs – We regularly evaluate our variable and fixed-rate debt.
The Company continues to evaluate the impact of the Inflation Reduction Act; however, we believe it is unlikely to have a material effect on our consolidated financial position, results of operations, and cash flow. Financing Costs – We regularly evaluate our variable and fixed-rate debt.
For the 52 weeks ended January 2, 2022, U.S. retail sales for salty snacks based on IRI data increased by 6.8% versus the comparable prior year period while our retail sales increased by 1.7% in the same period.
For the 52 weeks ended January 1, 2023, U.S. retail sales for salty snacks based on IRI data increased by 15.8% versus the comparable prior year period while our retail sales increased by 16.6% in the same period.
On November 30, 2020, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of Currency and the Federal Deposit Insurance Corporation issued a public statement that the administrator of LIBOR announced it will consult on an extension of publication of certain U.S.
LIBOR Transition – On November 30, 2020, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of Currency and the Federal Deposit Insurance Corporation issued a public statement that the administrator of the London Inter Bank Offered Rate (“LIBOR”) announced it will consult on an extension of publication of certain U.S.
Power brands include our iconic heritage Utz brand and iconic ON THE BORDER®; craft brands such as Zapp’s ®, Golden Flake ® Pork Skins, TORTIYAHS!, and Hawaiian ®; “better for you” brands such as Good Health ® and Boulder Canyon ®; and selected licensed brands such as TGI Fridays ®.
Power brands include our iconic heritage Utz brand and iconic ON THE BORDER® brand; craft brands such as Zapp’s ®, Golden Flake ® Pork Skins, TORTIYAHS!, and Hawaiian ®; BFY brands such as Good Health ® and Boulder Canyon ®; and select licensed brands such as TGI Fridays ®.
Our iconic portfolio of authentic, craft, and “better for you” brands, which includes Utz®, ON THE BORDER® , Zapp’s®, Golden Flake®, Good Health®, Boulder Canyon®, Hawaiian® Brand, and TORTIYAHS!®, among others, enjoys strong household penetration in the United States, where our products can be found in approximately 49% of U.S. households.
Our iconic portfolio of authentic, craft, and BFY brands, includes Utz®, ON THE BORDER® , Zapp’s®, Golden Flake®, Good Health®, Boulder Canyon®, Hawaiian® Brand, and TORTIYAHS!®, among others, and enjoy strong household penetration in the United States, where our products can be found in approximately 48% of U.S. households.
In fiscal year 2017, we embarked on a multi-year strategy to convert all company owned RSP routes to the IO model. The mix between IOs and RSP was approximately 88% and 12%, respectively, as of January 2, 2022 versus a 79% and 21% ratio for IOs and RSPs, respectively, as of January 3, 2021.
In fiscal year 2017, we embarked on a multi-year strategy to convert all company-owned RSP routes to the IO model. The mix between IOs and RSP was approximately 93% and 7%, respectively, as of January 1, 2023 versus an 88% and 12% ratio for IOs and RSPs, respectively, as of January 2, 2022.
These purchase commitments totaled $34.7 million as of January 2, 2022. 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.
These purchase commitments totaled $54.0 million as of January 1, 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 indefinite lived intangible assets are subject to annual impairment testing. 60 Goodwill and Indefinite-Lived Intangibles We allocate the cost of acquired companies to the identifiable tangible and intangible assets acquired and liabilities assumed, with the remaining amount classified as goodwill.
Goodwill and Indefinite-Lived Intangibles We allocate the cost of acquired companies to the identifiable tangible and intangible assets acquired and liabilities assumed, with the remaining amount classified as goodwill.
The proceeds of the Bridge Credit Agreement were used to fund the Company’s acquisition of Truco and the IP Purchase from OTB Acquisition, LLC, in which the Company withdrew $490.0 million to finance the Truco Acquisition and IP Purchase.
The proceeds of the Bridge Credit Agreement were used to fund the Company’s acquisition of Truco and the IP Purchase (as defined below) from OTB Acquisition, LLC, in which the Company withdrew $490.0 million to finance the acquisition of Truco (“such acquisition, the "Truco Acquisition") and certain intellectual property from OTB Acquisition, LLC (the "IP Purchase").
We believe the non-GAAP measures should always be considered along with the related U.S. GAAP financial measures. We have provided the reconciliations between the U.S. GAAP and non-GAAP financial measures below, and we also discuss our underlying U.S. GAAP results throughout this MD&A section.
We believe the non-GAAP measures should always be considered along with the related U.S. GAAP financial measures. We have provided the reconciliations between the U.S. GAAP and non-GAAP financial measures below, and we also discuss our underlying U.S. GAAP results throughout this discussion and analysis of our financial condition and results of operations.
The deferred payroll taxes must be deposited in two installments, with the first installment of $3.9 million paid as of December 31, 2021, and the remaining $3.9 million due on December 31, 2022.
The deferred payroll taxes must be deposited in two installments, with the first installment of $3.9 million paid as of December 31, 2021, and the remaining $3.9 million was paid shortly after fiscal year 2022.
The maximum amount of future payments the Company could be required to make under the guarantees equates to 25% of the outstanding loan balance up to $2.0 million. These 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.
The maximum amount of future payments the Company could be required to make under the guarantees equates to 25% of the outstanding loan balance up to $2.0 million. These loans are collateralized by the routes for which the loans are made.
"Acquisitions") an advance payment of principal was made on the First Lien Term Loan of $111.6 million, as such no principal payments are due until November 21, 2024. The Company incurred closing and other costs associated with the Term Loans, which were allocated to each loan on a specific identification basis based on original principal amounts.
"Acquisitions") an advance payment of principal was made on the First Lien Term Loan of $111.6 million. 54 The Company incurred closing and other costs associated with the Term Loans, which were allocated to each loan on a specific identification basis based on original principal amounts.
Additionally, the Company has experienced rising costs related to fuel and freight rates as well as rising labor costs which have negatively impacted profitability. Transportation costs have been on the rise for the last few months and may continue to rise which may adversely impact net income.
Additionally, the Company has experienced rising costs related to fuel and freight rates as well as rising labor costs which have negatively impacted profitability. Transportation costs have been on the rise since early in 2021 and may continue to rise which may also adversely impact net income.
Additionally, the salty snacks category has historically benefited from favorable competitive dynamics, including low private label penetration and category leaders competing primarily through marketing and innovation. We expect these consumer and category trends to continue to drive strong retail sales growth for salty snacks.
Snacking study reports that the average American snacks 2.7 times per day. Additionally, the salty snacks category has historically benefited from favorable competitive dynamics, including low private label penetration and category leaders competing primarily through marketing and innovation. We expect these consumer and category trends to continue to drive strong retail sales growth for salty snacks.
The standby letters of credit are primarily issued for insurance purposes. 56 Term debt and financing obligations On November 21, 2017, the Company entered into a First Lien Term Loan Credit Agreement (the “First Lien Term Loan”) in a principal amount of $535.0 million and a Second Lien Term Loan Credit Agreement (the “Second Lien Term Loan”, and collectively with the First Lien Term Loan, the “Term Loans”) in a principal amount of $125.0 million.
Term debt and financing obligations On November 21, 2017, the Company entered into a First Lien Term Loan Credit Agreement (the "First Lien Term Loan”) in a principal amount of $535.0 million and a Second Lien Term Loan Credit Agreement (the “Second Lien Term Loan”, and collectively with the First Lien Term Loan, the "Term Loans”) in a principal amount of $125.0 million.
Our fiscal year 2019 ended December 29, 2019 and was a fifty-two-week period, our fiscal year 2020 ended January 3, 2021 and was a fifty-three-week fiscal year, and our fiscal year 2021 ended January 2, 2022 and was a fifty-two-week fiscal year.
Our fiscal year 2020 ended January 3, 2021 and was a fifty-three-week fiscal year, our fiscal year 2021 ended January 2, 2022 and was a fifty-two-week fiscal year, and our fiscal year 2022 ended January 1, 2023 and was a fifty-two-week fiscal year.
We continue to use low-cost, short- and long-term debt to finance our ongoing working capital, capital expenditures and other investments and dividends. Our weighted average interest rate for the fiscal year ended January 2, 2022 was 3.5%, down from 4.9% during the same timeframe in fiscal 2020.
We continue to use low-cost, short- and long-term debt to finance our ongoing working capital, capital expenditures and other investments and dividends. Our weighted average interest rate for the fiscal year ended January 1, 2023 was 4.6%, up from 3.5% in fiscal year 2021.
We believe EBITDA, Adjusted EBITDA, and Further Adjusted EBITDA are useful to investors in the evaluation of Utz’s operating performance compared to other companies in the salty snack industry, as similar measures are commonly used by companies in this industry. We have also historically reported an Adjusted EBITDA metric to investors and banks for covenant compliance.
We believe EBITDA and Adjusted EBITDA are useful to investors in the evaluation of Utz’s operating performance compared to other companies in the salty snack industry, as similar measures are commonly used by companies in this industry.
Income Taxes We account for income taxes pursuant to the asset and liability method of ASC 740, Income Taxes, which require us to recognize current tax liabilities or receivables for the amount of taxes we estimate are payable or refundable for the current year, and deferred tax assets and liabilities for the expected future tax consequences attributable to temporary differences between the financial statement carrying amounts and their respective tax bases of assets and liabilities and the expected benefits of net operating loss and credit carryforwards.
We performed a quantitative impairment test on that intangible asset during which we compared the fair value of the intangible, using a relief from royalty method, to the carrying value of the asset and determined that the intangible asset was not impaired. 59 Income Taxes We account for income taxes pursuant to the asset and liability method of ASC 740, Income Taxes, which require us to recognize current tax liabilities or receivables for the amount of taxes we estimate are payable or refundable for the current year, and deferred tax assets and liabilities for the expected future tax consequences attributable to temporary differences between the financial statement carrying amounts and their respective tax bases of assets and liabilities and the expected benefits of net operating loss and credit carryforwards.
Net cash provided by financing activities was $82.8 million for the fiscal year ended January 2, 2022, which was primarily a result of an increase in term and equipment loans and exercise of warrants, versus net cash provided by financing activities of $231.5 million for the combined fiscal year ended January 3, 2021, which was primarily a result of the bridge credit agreement for the acquisition of Truco and exercise of warrants.
Compared to net cash provided by financing activities of $82.8 million for the fiscal year ended January 2, 2022, which was primarily a result of an increase in term and equipment loans and exercise of warrants.
Toward the end of 2020, we began to experience an increase in pricing in certain commodity trends that continued to rise over 2021. We expect this trend to continue through early 2022 and this may adversely impact our net income.
Toward the end of fiscal year 2020, we began to experience an increase in pricing in certain commodity trends that continued to rise throughout fiscal year 2021 and have continued to rise through fiscal year 2022. Continued cost increases in commodity trends may adversely impact our net income.
Accumulated Other Comprehensive (Loss) Income.” IO Loan Commitments During fiscal 2019, the Company sold $33.2 million of notes receivable from IOs on its books for $34.1 million in a series of transactions to a financial institution.
For further treatment of the Company’s interest rate swap, refer to "Note 10. Fair Value Measurements” and "Note 13. Accumulated Other Comprehensive (Loss) Income.” IO Loan Commitments During fiscal year 2019, the Company sold $33.2 million of notes receivable from IOs on its books for $34.1 million in a series of transactions to a financial institution.
As a result of the application of the acquisition method of accounting in the Successor period, the financial statements for the Successor period are presented on a full step-up basis as a result of the Business Combination, and are therefore not comparable to the financial statements of the Predecessor period that are not presented on the same full step-up basis due to the Business Combination. 43 Key Developments and Trends Our management team monitors a number of developments and trends that could impact our revenue and profitability objectives.
As a result of the application of the acquisition method of accounting in the Successor period, the financial statements for the Successor period are presented on a full step-up basis as a result of the Business Combination, and are therefore not comparable to the financial statements of the Predecessor period that are not presented on the same full step-up basis due to the Business Combination.
Additionally, in 2021, we incurred certain one-time costs of $3.3 million associated with the damage of a manufacturing facility, net of expected proceeds from insurance policies, and one-time expenses as a result of COVID-19 of $1.9 million. In 2021, total net cost was $24.5 million compared to $8.8 million and $5.1 million net cost for the 2020 and 2019, respectively.
Additionally, in fiscal year 2021, we incurred certain one-time costs of $3.3 million associated with the damage of a manufacturing facility, net of expected proceeds from insurance policies, and one-time expenses as a result of COVID-19 of $1.9 million.
We operate 17 manufacturing facilities with a broad range of capabilities, and our products are distributed nationally to grocery, mass merchant, club, convenience, drug and other retailers through direct shipments, distributors, and approximately 1,850 direct-store-delivery (“DSD”) routes.
We operate 16 manufacturing facilities with a broad range of capabilities, and our products are distributed nationally to grocery, mass merchant, club, convenience, drug and other retailers through direct shipments, distributors, and approximately 2,100 direct-store-delivery (“DSD”) routes. We have historically expanded our geographic reach and product portfolio organically and through acquisitions.
As of January 2, 2022 and January 3, 2021, $36.0 million and $0.0 million were outstanding under this facility. Availability under the ABL facility is based on a monthly accounts receivable and inventory borrowing base certification, which is net of outstanding letters of credit and amounts borrowed.
Availability under the ABL facility is based on a monthly accounts receivable and inventory borrowing base certification, which is net of outstanding letters of credit and amounts borrowed. As of January 1, 2023 and January 2, 2022, $163.0 million and $96.9 million, respectively, was available for borrowing, net of letters of credit.
Additionally, during the first fiscal quarter of 2020, the Company purchased intellectual property that include a deferred purchase price of $0.5 million, of which $0.4 million and $0.5 million was outstanding as of January 2, 2022 and January 3, 2021, respectively.
During the first fiscal quarter of 2020, the Company purchased intellectual property that include a deferred purchase price of $0.5 million, of which $0.3 million and $0.4 million was outstanding as of January 1, 2023 and January 2, 2022, respectively. 56 During the third quarter of 2021, the Company recorded liabilities related primarily to reclaiming distribution rights from distributors, of which $1.3 million was outstanding as of January 2, 2022.
Beginning with the fiscal year ended January 2, 2022 our independent registered public accounting firm is required to assess and attest to the effectiveness of our internal control over financial reporting.
Beginning with the fiscal year ended January 2, 2022 our independent registered public accounting firm was required to assess and attest to the effectiveness of our internal control over financial reporting. Results of Operations Overview The following tables present selected financial data for the fiscal year ended January 1, 2023, fiscal year ended January 2, 2022.
Standby letters of credit in the amount of $10.3 million and $14.1 million have been issued as of January 2, 2022 and January 3, 2021, respectively.
Standby letters of credit in the amount of $12.0 million and $10.3 million have been issued as of January 1, 2023 and January 2, 2022, respectively. The standby letters of credit are primarily issued for insurance purposes.
We offer 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.
We assess the goods promised in customers’ purchase orders and identify a performance obligation for each promise to transfer a good that is distinct. 58 We offer 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.
ASC 740-10 prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. 61 The benefit of tax positions taken or expected to be taken in our income tax returns is recognized in the financial statements if such positions are more likely than not of being sustained upon examination by taxing authorities.
The benefit of tax positions taken or expected to be taken in our income tax returns is recognized in the financial statements if such positions are more likely than not of being sustained upon examination by taxing authorities.
Business Combination On August 28, 2020, CCH domesticated into a Delaware corporation and changed its name to "Utz Brands, Inc." (the “Domestication”) and consummated the acquisition of certain limited liability company units of UBH, the parent of Utz Quality Foods, LLC (“UQF”), as a result of a new issuance by UBH and purchases from UBH’s existing equity holders pursuant to a Business Combination Agreement, dated as of June 5, 2020 (the “Business Combination Agreement”) among CCH, 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”), following the approval at the extraordinary general meeting of the shareholders of CCH held on August 27, 2020.
Based on 2022 retail sales, we are the second-largest producer of branded salty snacks in Alabama, Connecticut, Delaware, Louisiana, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Virginia, West Virginia, Washington, and Washington D.C., where we have acquired strong regional brands and distribution capabilities in recent years. 45 Business Combination On August 28, 2020, CCH domesticated into a Delaware corporation and changed its name to "Utz Brands, Inc." (the “Domestication”) and consummated the acquisition of certain limited liability company units of UBH, the parent of Utz Quality Foods, LLC (“UQF”), as a result of a new issuance by UBH and purchases from UBH’s existing equity holders pursuant to a Business Combination Agreement, dated as of June 5, 2020 (the “Business Combination Agreement”) among CCH, 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”), following the approval at the extraordinary general meeting of the shareholders of CCH held on August 27, 2020.
Distribution Route Purchase and Sale Transactions We purchase and sell distribution routes as a part of our maintenance of our DSD network. As new IOs are identified, we either sell our existing routes to the IOs or sell routes that were previously purchased by us to the IOs.
As new IOs are identified, we either sell our existing routes to the IOs or sell routes that were previously purchased by us to the IOs.
We anticipate completing substantially all remaining conversions during fiscal year 2022. The conversion process involves selling distribution rights to a defined route to an IO.
We anticipate continuing to work to complete conversions of remaining RSPs in fiscal year 2023. The conversion process involves selling distribution rights to a defined route to an IO.
Vitner's business, a leading brand of salty snacks in the Chicago, IL area. The acquisition increases our distribution in the Chicago area and Midwest Region and expands our product offering.
The acquisition increases our distribution in the Chicago area and Midwest Region and expands our product offering.
The 2 year CAGR from 2020 to 2021 was 8.1% for U.S.retail sales of salty snacks, during which time our retail sales increased by 8.3%. Competition – The salty snack industry is highly competitive and includes many diverse participants. Our products primarily compete with other salty snacks but also compete more broadly for certain eating occasions with other snack foods.
The 2 year CAGR during 2021 and 2022 was 11.0% for U.S. retail sales of salty snacks, during which time our retail sales increased by 8.8%. Competition – The salty snack industry is highly competitive and includes many diverse participants.
Pursuant to the terms of Amendment No. 3, the Company increased the principal balance of Term Loan B by $75.0 million to bring the aggregated balance of Term Loan B proceeds to $795.0 million, of which $787.2 million remains outstanding as of January 2, 2022.
On June 22, 2021, the Company entered into Amendment No. 3 to the Bridge Credit Agreement ("Amendment No. 3"). Pursuant to the terms of Amendment No. 3, the Company increased the principal balance of Term Loan B by $75.0 million to bring the aggregated balance of Term Loan B proceeds to $795.0 million.
Long-Term Demographics, Consumer Trends, and Demand – We participate in the attractive and growing $30 billion U.S. salty snacks category, within the broader $105 billion market for U.S. snack foods as of January 2, 2022.
Key Developments and Trends Our management team monitors a number of developments and trends that could impact our revenue and profitability objectives. Long-Term Demographics, Consumer Trends, and Demand – We participate in the attractive and growing $35 billion U.S. salty snacks category, within the broader $118 billion market for U.S. snack foods as of January 1, 2023.
"Operations and Summary of Significant Accounting Policies," to the audited condensed consolidated financial statements contained in Part II, Item 8 of this Annual Report on Form 10-K. 59 Application of Critical Accounting Policies and Estimates General Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States.
Application of Critical Accounting Policies and Estimates General Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States.
The decrease in the gain on sale of assets of $0.2 million was primarily the result of a lower route conversions in 2021 offset by gains on disposals of equipment.
The decrease in the gain on sale of assets of $1.2 million was primarily the result of a lower route conversions in 2022 offset by gains on disposals of equipment. Other income (expense), net Other income (expense), net was $(43.3) million for the fiscal year ended January 1, 2023 and $5.5 million for the fiscal year ended January 2, 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeA 1% increase in the LIBOR rate would have resulted in an additional $5.1 million of interest expense during the fiscal year 2021. 62 Credit Risk We are exposed to credit risks related to our accounts and notes receivable. We perform ongoing credit evaluations of our customers to minimize the potential exposure.
Biggest changeCredit Risk We are exposed to credit risks related to our accounts and notes receivable. We perform ongoing credit evaluations of our customers to minimize the potential exposure. We experienced no material credit losses during the fiscal years of 2022 or 2021.
To manage exposure to changing interest rates, we selectively enter into interest rate swap agreements to maintain a desired proportion of fixed to variable-rate debt. See I tem 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations under the section “Derivative Financial Instruments” for further information related to our interest rate swap agreements.
To manage exposure to changing interest rates, we selectively enter into interest rate swap agreements to maintain a desired proportion of fixed to variable-rate debt. See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations under the section “Derivative Financial Instruments” for further information related to our interest rate swap agreements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to certain commodity and interest rate risks as part of our ongoing business operations. We may use derivative financial instruments, where appropriate, to manage some of these risks related to interest rates. We do not use derivatives for trading purposes.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to certain commodity and interest rate risks as part of our ongoing business operations. We may use derivative financial instruments, where appropriate, to manage some of these risks related to interest rates.
Commodity Risk We purchase certain raw materials that are subject to price volatility caused by weather, market conditions, growing and harvesting conditions, governmental actions and other factors beyond our control. Our most significant raw material requirements include potatoes, oil, flour, wheat, corn, cheese, spices, and seasonings. We also purchase packaging materials that are subject to price volatility.
We do not use derivatives for trading purposes. 60 Commodity Risk We purchase certain raw materials that are subject to price volatility caused by weather, market conditions, growing and harvesting conditions, governmental actions and other factors beyond our control. Our most significant raw material requirements include potatoes, oil, flour, wheat, corn, cheese, spices, and seasonings.
In the normal course of business, in order to mitigate the risks of volatility in commodity markets to which we are exposed, we enter into forward purchase agreements with certain suppliers based on market prices, forward price projections and expected usage levels. Amounts committed under these forward purchase agreements are discussed in Item 7.
We also purchase packaging materials that are subject to price volatility. In the normal course of business, in order to mitigate the risks of volatility in commodity markets to which we are exposed, we enter into forward purchase agreements with certain suppliers based on market prices, forward price projections and expected usage levels.
While these interest rate swap agreements fixed a portion of the interest rate at a predictable level, interest expense would have been $3.1 million lower and equivalent without these swaps during the year ended January 2, 2022.
These interest rate swap agreements fixed a portion of the interest rate at a predictable level. Interest expense would have been $1.7 million higher without these swaps during the fiscal year ended January 1, 2023.
Our reserve for potential future bad debt was $1.4 million as of January 2, 2022 and $0.2 million as of January 3, 2021.
During the fiscal year ended January 1, 2023 and the fiscal year ended January 2, 2022, net bad deb t expense w as $0.9 million and $0.4 million, respectively. Our reserve for potential future bad debt was $1.8 million as of January 1, 2023 and $1.4 million as of January 2, 2022.
Including the effect of the interest rate swap agreement, the weighted average interest rate was 3.5% and 4.4%, respectively, as of January 2, 2022 and January 3, 2021.
Including the effect of the interest rate swap agreements, the weighted average interest rate was 5.5% and 3.5%, respectively, as of January 1, 2023 and January 2, 2022. A 1% increase in the SOFR rate would have resulted in an additional $2.8 million of interest expense during the fiscal year 2022 based on the unhedged portion of debt.
Management’s Discussion and Analysis of Financial Condition and Results of Operations under the section “Derivative Financial Instruments.” Interest Rate Risk Our variable-rate debt obligations incur interest at floating rates based on changes in the LIBOR rate.
A 1% increase in the price of the commodities used within our products and packaging would result in a reduction of our gross profit of approximately $5.0 million. Interest Rate Risk Our variable-rate debt obligations incur interest at floating rates based on changes in the SOFR rate.
Removed
We experienced no material credit losses during the fiscal years of 2021 or 2020. During the year ended January 2, 2022 and the combined year ended January 3, 2021, net bad deb t expense was $0.4 million and $0.2 million, respectively.
Added
Amounts committed under these forward purchase agreements are discussed in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations under the section “Derivative Financial Instruments” of this Annual Report on Form 10-K.

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