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Item 2. Management’s Discussion and Analysis

2021-08-12 compared with 2021-05-13 · 177 added, 114 removed, 322 unchanged (47% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited combined interim consolidated financial statements as of and for the thirteen weeks ended April 4, 2021 (Successor), together with our audited combined consolidated financial statements for our most recently completed fiscal year set forth under Item 8 of our Annual Report on Form 10-K/A.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited combined interim consolidated financial statements as of and for the thirteen and twenty-six weeks ended July 4, 2021 (Successor), together with our audited combined consolidated financial statements for our most recently completed fiscal year set forth under Item 8 of our 2020 Form 10-K/A.

This discussion contains forward-looking statements that involve risks and uncertainties.

Our actual results could differ materially from those discussed below.

Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in Item 1A “Risk Factors” of our Annual Report on Form 10-K/A and other filings under the Exchange Act.

Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in Item 1A “Risk Factors” of our 2020 Form 10-K/A and other filings under the Exchange Act.

Our fiscal year end is the Sunday closest to December 31.

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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.

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 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.

UBI was determined to be the accounting acquirer and UBH was determined to be the accounting acquiree, in accordance with ASC 810, as the Company is considered to be the primary beneficiary of UBH after the Business Combination.

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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 $28 billion U.S.

Long-Term Demographics, Consumer Trends, and Demand – We participate in the attractive and growing nearly $29 billion U.S.

salty snacks category, within the broader $97 billion market for U.S.

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salty snack category demonstrated strong performance during the novel coronavirus (“COVID-19”) pandemic which began in March 2020 in the U.S.

For the thirteen weeks ended April 4, 2021 (Successor), U.S.

For the thirteen weeks ended July 4, 2021 (Successor), U.S.

retail sales for salty snacks based on IRI data increased by 3.8% versus the comparable prior year period.

In the same period, our retail sales decreased by 7.2%.

salty snack category has grown at a 6% CAGR from 2019 to 2021, while the Company has grown at a 5.9% CAGR over the same time period.

salty snack category has grown at a 7.1% CAGR from June 30, 2019 to July 4, 2021, while the Company has grown at a 6.5% CAGR over the same time period.

Competition – The salty snack industry is highly competitive and includes many diverse participants.

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We manage these expenses through annual cost saving and productivity initiatives, sourcing and hedging programs, pricing actions, refinancing and tax optimization.

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.

Additionally, we maintain ongoing efforts led by our project management office, 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.

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 enactmen t.

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.

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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 thirteen weeks ended April 4, 2021 (Successor) was 3.7%, down from 5.4% during the thirteen weeks ended March 29, 2020 (Predecessor).

Our weighted average interest rate for the twenty-six weeks ended July 4, 2021 (Successor) was 3.5%, down from 5.4% during the twenty-six weeks ended June 28, 2020 (Predecessor).

We have used interest rate swaps to help manage some of our exposure to interest rate changes, which can drive cash flow variability related to our debt.

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"Long-Term Debt" and Note 9.

"Derivative Financial Instruments and Purchase Commitments" to our unaudited condensed consolidated financial statements included under Part I, Item 1 of this filing for additional information on debt, derivative and purchase commitment activity.

LIBOR Transition – As of April 4, 2021, we had $718.2 million in variable rate indebtedness, down from $780.0 million at January 3, 2021.

As of April 4, 2021 our variable rate indebtedness is tied to the Eurocurreny Rate which currently uses the London Inter Bank Offered Rate ("LIBOR") as a benchmark for establishing applicable rates.

"Derivative Financial Instruments and Purchase Commitments" to our unaudited consolidated financial statements included under Part I, Item 1 of this filing for additional information on debt, derivative and purchase commitment activity.

LIBOR Transition – As of July 4, 2021, we had $791.2 million in variable rate indebtedness, up from $780.0 million at January 3, 2021.

As of July 4, 2021 our variable rate indebtedness is tied to the Eurocurrency Rate which currently uses the London Inter Bank Offered Rate ("LIBOR") as a benchmark for establishing applicable rates.

As announced in July 2017, LIBOR is expected to be phased out by the end of 2021.

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The Company paid the aggregate cash purchase price of approximately $25.2 million which was funded from current cash-on-hand.

On June 7, 2021, the Company closed on 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 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 purchase price of approximately $40.3 million which was funded in part from incremental financing on an existing term loan.

Commodity Trends

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Our hedging techniques, such as forward contracts, limit the impact of fluctuations in the cost of our principal raw materials; however, we may not be able to fully hedge against commodity cost changes, where there is a limited ability to hedge, and our hedging strategies may not protect us from increases in specific raw material costs.

Toward the end of 2020, we began to experience an increase in pricing in certain commodities that has continued into Q1 2021.

We expect this trend to continue throughout 2021.

Toward the end of 2020, we began to experience an increase in pricing in certain commodities that has continued into the second quarter of fiscal year 2021.

We expect this trend to continue throughout 2021 and may adversely impact our net income.

Due to competitive or market conditions, planned trade or promotional incentives, or other factors, our pricing actions may also lag commodity cost changes.

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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 81% and 19%, respectively as of April 4, 2021 versus 76% and 24% ratio for IOs and RSPs respectively as of March 29, 2020.

The mix between IOs and RSP was approximately 83% and 17%, respectively as of July 4, 2021 versus 75% and 25% ratio for IOs and RSPs respectively as of June 28, 2020.

We anticipate completing substantially all remaining conversions by the second quarter of fiscal year 2022.

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Results of Operations

The following tables present selected unaudited financial data for the thirteen weeks ended April 4, 2021 (Successor) and the thirteen weeks ended March 29, 2020 (Predecessor).

Successor Predecessor

(in thousands) Thirteen weeks ended April 4, 2021 Thirteen weeks ended March 29, 2020

The following table presents selected unaudited financial data for the thirteen and twenty-six weeks ended July 4, 2021 (Successor) and the thirteen and twenty-six weeks ended June 28, 2020 (Predecessor).

Successor Predecessor Successor Predecessor

(in thousands) Thirteen weeks ended July 4, 2021 Thirteen weeks ended June 28, 2020 Twenty-six weeks ended July 4, 2021 Twenty-six weeks ended June 28, 2020

Net sales $ 297,919 $ 241,977 $ 567,101 $ 470,006

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Income from operations 4,369 17,451 13,668 29,664

Other (expense) income

Other income (expense)

Interest expense (7,896) (9,987) (18,757) (19,630)

Other (expense) income 718 580

Loss on remeasurement of warrant liabilities (21,501) —

Other (expense) income, net (31,644) (9,063)

(Loss) income before taxes (22,345) 3,150

Income tax (benefit) expense 1,004 1,458

Net (loss) income (23,349) 1,692

Other income 758 259 1,476 839

Gain (loss) on remeasurement of warrant liability 19,368 — (2,133) —

Other income (expense), net 12,230 (9,728) (19,414) (18,791)

Income (loss) before taxes 16,599 7,723 (5,746) 10,873

Income tax expense 420 1,171 1,424 2,629

Net income (loss) 16,179 6,552 (7,170) 8,244

Net loss attributable to noncontrolling interest 1,400 — 2,220 —

Net (loss) income attributable to controlling interest $ (22,529) $ 1,692

Thirteen weeks ended April 4, 2021 (Successor) versus thirteen weeks ended March 29, 2020 (Predecessor)

Net sales was $269.2 million and $228.0 million for the thirteen weeks ended April 4, 2021 (Successor), and the thirteen weeks ended March 29, 2020 (Predecessor), respectively.

Net sales for the thirteen weeks ended April 4, 2021 (Successor) increased $41.2 million or 18.0% over the comparable period in 2020.

The increase in net sales for the thirteen weeks ended April 4, 2021 (Successor) was primarily related to the acquisitions of Truco, Vitner's, and H.K.

Anderson and favorable price/mix of 1.9%.

The thirteen weeks ended March 29, 2020 (Predecessor) experienced increased sales across customers and geographies that were heightened by increased in-home consumption of salty snacks due to COVID-19.

IO discounts increased to $26.5 million for the thirteen weeks ended April 4, 2021 (Successor) from $24.1 million for the corresponding thirteen weeks ended March 29, 2020 (Predecessor).

Excluding the impacts of acquisitions and changes to IO discounts due to RSP to IO conversion, total net sale declined 2.9% for the thirteen weeks ended April 4, 2021 (Successor) versus the corresponding period in 2020.

Net income (loss) attributable to controlling interest $ 17,579 $ 6,552 $ (4,950) $ 8,244

Thirteen weeks ended July 4, 2021 (Successor) versus thirteen weeks ended June 28, 2020 (Predecessor)

Net sales was $297.9 million and $242.0 million for the thirteen weeks ended July 4, 2021 (Successor), and the thirteen weeks ended June 28, 2020 (Predecessor), respectively.

Net sales for the thirteen weeks ended July 4, 2021 (Successor) increased $55.9 million or 23.1% over the comparable period in 2020.

The increase in net sales for the thirteen weeks ended July 4, 2021 (Successor) was primarily related to sales attributable to Truco, Vitner's, H.K.

Anderson, and Festida Foods following the acquisitions of such entities.

IO discounts increased to $30.4 million for the thirteen weeks ended July 4, 2021 (Successor) from $23.7 million for the corresponding thirteen weeks ended June 28, 2020 (Predecessor).

Excluding the impacts of acquisitions and changes to IO discounts due to RSP to IO conversion, total net sales declined 0.7% for the thirteen weeks ended July 4, 2021 (Successor) versus the corresponding period in 2020.

The thirteen weeks ended June 28, 2020 (Predecessor) experienced increased sales across customers and geographies that were heightened by increased in-home consumption of salty snacks due to COVID-19.

Net sales are evaluated based on our classification as Power and Foundation Brands.

Power Brands (“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 ®;

“better for you” brands such as Good Health ® and Boulder Canyon ®;

and selected licensed brands such as TGI Fridays ® and Herdez ®.

Our Foundation Brands (“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® as well as partner and private label brands.

For the thirteen weeks ended July 4, 2021 (Successor), excluding brands acquired through our H.K.

Anderson, Festida Foods, Truco, and Vitner's acquisitions, Power Brand sales increased by approximately 1%, while Foundation Brand sales decreased approximately 3% from the thirteen weeks ended June 28, 2020 (Predecessor).

The decline in net sales for Foundation Brands is due to lapping of prior period sales driven by pantry loading and increased at home consumption at the onset of the COVID-19 pandemic starting in the first fiscal quarter of 2020 and continuing into the second fiscal quarter of 2020.

Partially offsetting the COVID-19 lap was a rebound in the convenience store channel, as well as "on-the-go" oriented channels such as food service.

Cost of goods sold and Gross profit

Gross profit was $95.6 million and $84.9 million for the thirteen weeks ended July 4, 2021 (Successor) and the thirteen weeks ended June 28, 2020 (Predecessor), respectively.

The increase in gross profit for thirteen weeks ended July 4, 2021 (Successor) was driven by higher sales driven by acquisitions, contributions from the acquisitions of Truco, Festida Foods, Vitner's, and H.K.

Anderson, which were partially offset by the commodity cost and wage inflation.

Our gross profit margin was 32.1% for the thirteen weeks ended July 4, 2021 (Successor) versus 35.1% for the thirteen weeks ended June 28, 2020 (Predecessor).

The decrease in gross profit margin was primarily driven by higher commodity inflation, higher labor costs, and inbound freight costs.

Additionally, IO discounts increased to $30.4 million for the thirteen weeks ended July 4, 2021 (Successor) from $23.7 million for the thirteen weeks ended June 28, 2020 (Predecessor), reducing gross profit by $6.7 million.

Selling, general and administrative expense

Selling, general and administrative expenses increased to $93.5 million, up $25.4 million or 37.3%, for the thirteen weeks ended July 4, 2021 (Successor) from $68.1 million for the thirteen weeks ended June 28, 2020 (Predecessor).

The increased expenses for the thirteen weeks ended July 4, 2021 (Successor) were primarily driven by incremental operating costs associated with acquisitions and being a public company, $10.3 million, along with the associated depreciation and amortization of $7.4 million, related to the acquisitions and the recent Business Combination.

Other factors driving increased year-over-year cost include industry-wide inflationary pressures in transportation and fuel costs of $4.5 million, and increased spend for marketing/media of $1.7 million, to drive future growth.

Gain on sale of assets

Gain on sale of assets was $2.3 million and $0.7 million for the thirteen weeks ended July 4, 2021 (Successor), and the thirteen weeks ended June 28, 2020 (Predecessor), respectivel y.

Company owned routes were recorded at fair value as a result of the Business Combination, which resulted i n increasing the IO route asset by $10.5 million.

Conversions continued during the second fiscal quarter of 2021 and gains were offset by the values of the routes that were established as part of the Business Combination.

Other income (expense), net

Other income (expense), net was $12.2 million and $(9.7) million for the thirteen weeks ended July 4, 2021 (Successor), and the thirteen weeks ended June 28, 2020 (Predecessor), respectively.

The increase in income for the thirteen weeks ended July 4, 2021 (Successor) was primarily due to a $19.4 million gain from the remeasurement of warrant liability.

Inco me tax expense was $0.4 million and $1.2 million for the thirteen weeks ended July 4, 2021 (Successor), and the thirteen weeks ended June 28, 2020 (Predecessor), respectively.

Twenty-six weeks ended July 4, 2021 (Successor) versus twenty-six week periods ended June 28, 2020 (Predecessor)

Net sales was $567.1 million and $470.0 million for the twenty-six weeks ended July 4, 2021 (Successor), and the twenty-six weeks ended June 28, 2020 (Predecessor), respectively.

Net sales for the twenty-six weeks ended July 4, 2021 (Successor) increased $97.1 million or 20.7% over the comparable period in 2020.

The increase in net sales for the twenty-six weeks ended July 4, 2021 (Successor) was primarily related to the acquisitions of Truco, Vitner's, H.K.

Anderson, and Festida Foods.

The twenty-six weeks ended June 28, 2020 (Predecessor) experienced increased sales across customers and geographies that were heightened by increased in-home consumption of salty snacks due to COVID-19.

IO discounts increased to $56.9 million for the twenty-six weeks ended July 4, 2021 (Successor) from $47.8 million for the corresponding twenty-six weeks ended June 28, 2020 (Predecessor).

Excluding the impacts of acquisitions and changes to IO discounts due to RSP to IO conversions, total net sales declined 1.6% for the twenty-six weeks ended July 4, 2021 (Successor) versus the corresponding period in 2020.

Net sales are evaluated based on our classification as Power and Foundation brands.

Power brands include our iconic heritage Utz brand;

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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® as well as partner and private label brands.

For the thirteen weeks ended April 4, 2021 (Successor), excluding brands acquired through our H.K.

Anderson, Truco, and Vitner's acquisitions, Power Brand sales decreased by approximately 1%, while Foundation Brand sales decreased approximately 4% from the thirteen weeks ended March 29, 2020 (Predecessor).

The decline in both Power and Foundation Brands is due to lapping of prior period sales driven by pantry loading at the onset of the COVID-19 pandemic in the first quarter of 2020.

Conversely, our Power Brands have a stronger presence in the grocery channel, which have performed well during this time period.

In addition the eCommerce channel continues to grow and we experienced some rebounding sales in the convenience store channel due to a lower impact of COVID-19 related conditions.

For the twenty-six weeks ended July 4, 2021 (Successor), excluding brands acquired through our H.K.

Anderson, Truco, Festida Foods, and Vitner's acquisitions, Power Brand sales were effectively flat, while Foundation Brand sales decreased approximately 4% from the twenty-six weeks ended June 28, 2020 (Predecessor).

The decline in Foundation Brands is due to lapping of prior period sales driven by pantry loading and greater at home consumption at the onset of the COVID-19 pandemic starting in the first fiscal quarter of 2020 and continuing through the second fiscal quarter of 2020.

Partially offsetting the COVID-19 lap was a rebound in the convenience store channel, as well as "on-the-go" oriented channels such as food service.

Cost of goods sold and Gross profit

Gross profit was $95.2 million and $80.0 million for the thirteen weeks ended April 4, 2021 (Successor) and the thirteen weeks ended March 29, 2020 (Predecessor), respectively.

The increase in gross profit for thirteen weeks ended April 4, 2021 (Successor) was driven by higher sales driven by acquisitions, contributions from the acquisition of Truco, Vitner's, and H.K.

Anderson, leveraging our existing infrastructure and available capacity, improving efficiencies with productivity initiatives, which were partially offset by the commodity cost inflation.

Our gross profit margin was 35.4% for the thirteen weeks ended April 4, 2021 (Successor) versus 35.1% for the thirteen weeks ended March 29, 2020 (Predecessor).

The improvement in gross profit margin was primarily driven by net price realization and favorable mix of Power Brands with better margins, partially offset by increased commodity costs.

Additionally, IO discounts increased to $26.5 million for the thirteen weeks ended March 29, 2020 (Predecessor) from $24.1 million for the thirteen weeks ended April 4, 2021 (Successor), reducing gross profit by $2.4 million.

Gross profit was $190.8 million and $164.9 million for the twenty-six weeks ended July 4, 2021 (Successor) and the twenty-six weeks ended June 28, 2020 (Predecessor), respectively.

The increase in gross profit for twenty-six weeks ended July 4, 2021 (Successor) was primarily driven by higher sales driven by acquisitions, contributions from the acquisitions of Truco, Festida Foods, Vitner's, and H.K.

Anderson, which were partially offset by the commodity cost and wage inflation.

Our gross profit margin was 33.6% for the twenty-six weeks ended July 4, 2021 (Successor) versus 35.1% for the twenty-six weeks ended June 28, 2020 (Predecessor).

The decrease in gross profit margin was primarily driven by higher commodity inflation, higher labor and inbound freight costs .

Additionally, IO discounts increased to $56.9 million for the twenty-six weeks ended July 4, 2021 (Successor) from $47.8 million for the twenty-six weeks ended June 28, 2020 (Predecessor), reducing gross profit by $9.1 million.

Selling, general and administrative expense

Selling, general and administrative expenses were $86.7 million and $68.3 million for the thirteen weeks ended April 4, 2021 (Successor), and the thirteen weeks ended March 29, 2020 (Predecessor), respectively.

Selling, general and administrative expenses for the thirteen weeks ended April 4, 2021 (Successor) increased $18.4 million or 26.9% over the corresponding period in 2020.

The increased expenses for the thirteen weeks ended April 4, 2021 (Successor) were driven by higher Business transformation initiatives, primarily attributable to expenses associated with the conversion of company-owned routes to IO routes and higher operational costs related to incremental operating expense of the acquired Truco, Vinter's, and H.K.

Anderson businesses, higher public company compliance costs, higher delivery costs, partially offset by lower Acquisition and Integration expenses.

Gain (loss) on sale of assets

Gain on sale of assets was $0.7 million and $0.5 million for the thirteen weeks ended April 4, 2021 (Successor), and the thirteen weeks ended March 29, 2020 (Predecessor), respectivel y.

Company owned routes were recorded at fair value as a result of the Business Combination, which resulted in increasing the IO route asset by $10.5 million.

During the first fiscal quarter of 2021 conversions continued, gains were offset by the values of the routes that were established as part of the Business Combination.

Other (expense) income, net

Other expense, net was $31.6 million and $9.1 million for the thirteen weeks ended April 4, 2021 (Successor), and the thirteen weeks ended March 29, 2020 (Predecessor), respectively.

The incremental expense for the thirteen weeks ended April 4, 2021 (Successor) was primarily due to a $21.5 million loss from the remeasurement of warrant liability and additional interest expense of $1.2 million.

Inco me tax expense was $1.0 million and $1.5 million for the thirteen weeks ended April 4, 2021 (Successor), and the thirteen weeks ended March 29, 2020 (Predecessor), respectively.

Selling, general and administrative expenses were $180.1 million and $136.4 million for the twenty-six weeks ended July 4, 2021 (Successor), and the twenty-six weeks ended June 28, 2020 (Predecessor), respectively.

Selling, general and administrative expenses for the twenty-six weeks ended July 4, 2021 (Successor) increased $43.8 million or 32.1% over the corresponding period in 2020.

The increased expenses for the twenty-six weeks ended July 4, 2021 (Successor) were primarily driven by incremental operating costs associated with acquisitions and being a public company of $20.5 million, along with the associated depreciation and amortization of $15.0 million, related to the acquisitions and the recent Business Combination.

Other factors driving increased year-over-year cost include industry-wide inflationary pressures in transportation and fuel costs of $7.7 million, and increased spend for marketing/media of $3.3 million, to drive future growth.

Gain on sale of assets

Gain on sale of assets was $3.0 million and $1.1 million for the twenty-six weeks ended July 4, 2021 (Successor), and the twenty-six weeks ended June 28, 2020 (Predecessor), respectivel y.

Company owned routes were recorded at fair value as a result of the Business Combinati on, which resulted in increasing the IO route asset by $10.5 million.

Conversion continued during th e first fiscal quarter of 2021 and gains were offset by the values of the routes that were established as part of the Business Combination.

Other expense, net

Other expense, net was $19.4 million and $18.8 million for the twenty-six weeks ended July 4, 2021 (Successor), and the twenty-six weeks ended June 28, 2020 (Predecessor), respectively.

The incremental expense for the twenty-six weeks ended July 4, 2021 (Successor) was primarily due to a $2.1 million loss from the remeasurement of the warrant liability.

Inco me tax expense was $1.4 million and $2.6 million for the twenty-six weeks ended July 4, 2021 (Successor), and the twenty-six weeks ended June 28, 2020 (Predecessor), respectively.

EBITDA, Adjusted EBITDA, and Further Adjusted EBITDA

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and Financing-Related Costs.

We define Further Adjusted EBITDA as Adjusted EBITDA after giving effect to pre-acquisition EBITDA of Truco, pre-acquisition Adjusted EBITDA of Vitner's, and pre-acquisition EBITDA of H.K.

We define Further Adjusted EBITDA as Adjusted EBITDA after giving effect to pre-acquisition EBITDA of Truco, pre-acquisition Adjusted EBITDA of Vitner's, pre-acquisition EBITDA of H.K.

Anderson, pre-acquisition EBITDA of Festida.

We also report Further Adjusted EBITDA as a percentage of Pro Forma Net Sales as an additional measure to evaluate our Further Adjusted EBITDA margins on Pro Forma Net Sales.

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We also report Adjusted EBITDA as a percentage of Net Sales as an additional measure for investors to evaluate our Adjusted EBITDA margins on Net Sales.

The following table provides a reconciliation from Net (Loss) Income to EBITDA and Adjusted EBITDA for the thirteen weeks ended April 4, 2021 (Successor), and the thirteen weeks ended March 29, 2020 (Predecessor), respectively:

Successor Predecessor

(dollars in millions) Thirteen weeks ended April 4, 2021 Thirteen weeks ended March 29, 2020

Net (loss) income $ (23.3) $ 1.7

The following table provides a reconciliation from Net Income (Loss) to EBITDA and Adjusted EBITDA for the thirteen and twenty-six weeks ended July 4, 2021 (Successor) and June 28, 2020 (Predecessor), respectively:

Successor Predecessor Successor Predecessor

(dollars in millions) Thirteen weeks ended July 4, 2021 Thirteen weeks ended June 28, 2020 Twenty-six weeks ended July 4, 2021 Twenty-six weeks ended June 28, 2020

Net Income (Loss) $ 16.2 $ 6.6 $ (7.2) $ 8.2

Plus non-GAAP adjustments:

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Interest Income (IO loans) (1)

(0.4) (0.6) (1.3) (0.9)

EBITDA 43.2 26.2 50.3 47.4

Certain Non-Cash Adjustments (2)

2.8 1.7 7.0 2.8

Acquisition and Integration (3)

2.0 3.9 3.9 9.1

Business Transformation Initiatives (4)

6.5 0.8 9.8 2.4

Financing-Related Costs (5)

Loss on Remeasurement of Warrant Liability (6)

0.6 — 0.6 0.1

(Gain) Loss on Remeasurement of Warrant Liability (6)

(19.4) — 2.1 —

Adjusted EBITDA 35.7 32.6 73.7 61.8

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Truco Pre-Acquisition Adjusted EBITDA (7)

— 16.2 — 25.9

Festida Pre-Acquisition Adjusted EBITDA (7)

1.0 1.8 2.6 3.1

Further Adjusted EBITDA $ 36.7 $ 51.5 $ 76.3 $ 92.3

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Incentive programs – Utz Quality Foods, LLC, our wholly-owned subsidiary, established the 2018 Long-Term Incentive Plan (the “2018 LTIP”) for employees in February 2018.

The Company recorded expense of $0.8 million for thirteen weeks ended March 29, 2020 (Predecessor).

The Company recorded expense of $1.1 million and $1.9 million for thirteen weeks and twenty-six weeks ended June 28, 2020 (Predecessor), respectively.

Expenses incurred for the 2018 LTIP are non-operational in nature and are expected to decline upon the vesting of the remaining phantom units from fiscal year 2018 and fiscal year 2019 at the end of fiscal year 2021.

The phantom units under the 2018 LTIP were converted into the 2020 LTIP RSUs as part of the Business Combination.

For the thirteen weeks ended April 4, 2021 (Successor), the Company incurred $2.9 million of share based compensation under the 2020 LTIP.

For the thirteen weeks and twenty-six weeks ended July 4, 2021 (Successor), the Company incurred $2.7 million and $5.6 million, respectively, of stock-based compensation under the 2020 LTIP.

Purchase Commitments and Other Adjustments – We have purchased commitments for specific quantities at fixed prices for certain of our products’ key ingredients.

To facilitate comparisons of our underlying operating results, this adjustment was made to remove the volatility of purchase commitment related gains and losses.

For the thirteen weeks ended April 4, 2021 (Successor) we recorded a loss of $0.0 million compared to a benefit of $0.3 million for thirteen weeks ended March 29, 2020 (Predecessor).

For each of the thirteen weeks and twenty-six weeks ended July 4, 2021 (Successor) we recorded a loss of $0.0 million compared to a benefit of $0.7 million and $1.0 million for the thirteen weeks and twenty-six weeks ended June 28, 2020 (Predecessor), respectively.

(3) Adjustment for Acquisition and Integration Costs – This is comprised of consulting, transaction services, and legal fees incurred for acquisitions and certain potential acquisitions.

The majority of charges are related to costs incurred for the Vitner's acquisition, the Truco acquisition, the Kitchen Cooked acquisition, and related integration expenditures where we incurred costs of $1.9 million and $5.2 million for the thirteen weeks ended April 4, 2021 (Successor) and the thirteen weeks ended March 29, 2020 (Predecessor), respectively.

The majority of charges are related to costs incurred for the Vitner's acquisition, the Truco acquisition, the Kitchen Cooked acquisition, the Festida Foods acquisition, and related integration expenditures.

(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.

In addition, certain Rice/Lissette family-related costs incurred but not part of normal business operations, and gains realized from the sale of distribution rights to IOs and the subsequent disposal of trucks, and ERP transition costs, offset by severance costs associated with the elimination of RSP positions, fall into this category.

The Company incurred such costs of $3.3 million and $1.6 million for the thirteen weeks ended April 4, 2021 (Successor) and the thirteen weeks ended March 29, 2020 (Predecessor), respectively.

(5) Financing-Related Costs – These costs include adjustments for various items related to raising debt and preferred equity capital or debt extinguishment costs.

The Company incurred expenses of $0.1 million for the thirteen weeks ended March 29, 2020 (Predecessor).

The Company incurred expenses of $0.6 million for the thirteen weeks and twenty-six weeks ended July 4, 2021 (Successor), compared to $0.0 million and $0.1 million for the thirteen weeks and twenty-six weeks ended June 28, 2020 (Predecessor), respectively.

(6) Losses (or gains) 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.

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Liquidity and Capital Resources

The following table presents net cash provided by operating activities, investing activities and financing activities for the thirteen weeks ended April 4, 2021 (Successor) and thirteen weeks ended March 29, 2020 (Predecessor).

The following table presents net cash (used in) provided by operating activities, investing activities and financing activities for the twenty-six weeks ended July 4, 2021 (Successor) and twenty-six weeks ended June 28, 2020 (Predecessor).

Successor Predecessor

(in thousands) Thirteen weeks ended April 4, 2021 Thirteen weeks ended March 29, 2020

Net cash used in operating activities $ (13,183) $ (2,773)

(in thousands) Twenty-six weeks ended July 4, 2021 Twenty-six weeks ended June 28, 2020

Net cash (used in) provided by operating activities $ (44) $ 20,313

Net cash used in investing activities (70,543) (18,011)

Net cash (used in) provided by financing activities (4,317) 7,815

For the thirteen weeks ended April 4, 2021 (Successor), our consolidated cash balance, including cash equivalents, was $4.0 million or $42.8 million lower than at January 3, 2021.

Net cash used in operating activities for the thirteen weeks ended April 4, 2021 (Successor) was $25.3 million compared to $14.5 million thirteen weeks ended March 29, 2020 (Predecessor), with the difference largely driven by changes increases in accounts receivable and inventory, and reductions in accrued expense largely driven higher year over year compensation payouts.

Cash used in investing activities for the thirteen weeks ended April 4, 2021 (Successor) was $25.3 million mostly driven by the Vitner's acquisition of $25.2 million, versus cash used in investing activity of $14.5 million for the thirteen weeks ended March 29, 2020 (Predecessor), which was primarily driven by the acquisitions of Kitchen Cooked.

Net cash used in financing activities was $4.3 million for the thirteen weeks ended April 4, 2021 (Successor), which was primarily a result of the payoffs of the First Term Loan and the Bridge Credit Agreement, offset by the borrowings under Term Loan B, proceeds from the redemption of warrants, and net borrowings on the ABL, versus net cash provided by financing activities of $7.8 million for the thirteen weeks ended March 29, 2020 (Predecessor) which was primarily the result of net borrowings on the ABL.

Net cash provided by (used in) financing activities 50,501 (7,384)

For the twenty-six weeks ended July 4, 2021 (Successor), our consolidated cash balance, including cash equivalents, was $26.7 million or $20.1 million lower than at January 3, 2021.

Net cash provided by operating activities for the twenty-six weeks ended July 4, 2021 (Successor) was $0.0 million compared to $20.3 million twenty-six weeks ended June 28, 2020 (Predecessor), with the difference largely driven by changes in accounts receivable and inventory, and reductions in accrued expenses largely driven by higher year over year compensation payouts.

Cash used in investing activities for the twenty-six weeks ended July 4, 2021 (Successor) was $70.5 million mostly driven by the Vitner's and Festida Foods acquisitions totaling $66.6 million, versus cash used in investing activity of $18.0 million for the twenty-six weeks ended June 28, 2020 (Predecessor), which was primarily driven by the acquisition of Kitchen Cooked.

Net cash provided by financing activities was $50.5 million for the twenty-six weeks ended July 4, 2021 (Successor), which was primarily a result of the payoffs of the First Term Loan and the Bridge Credit Agreement, offset by the borrowings under Term Loan B, proceeds from the redemption of Warrants, and net borrowings on the ABL, versus net cash used in financing activities of $7.4 million for the twenty-six weeks ended June 28, 2020 (Predecessor) which was primarily the result of net repayments on the ABL and distributions to members.

Financing Arrangements

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Revolving Credit Facility

On November 21, 2017, UBH entered into an asset based revolving credit facility (the “ABL facility”) in an initial aggregate principal amount of $100.0 million.

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.

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 and as of April 4, 2021, the outstanding balance of the ABL facility was $15.0 million.

No amounts were outstanding under this facility as of January 3, 2021.

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.

As of April 4, 2021 and January 3, 2021, $93.4 million and $106.4 million, respectively, was available for borrowing, net of letters of credit.

On December 18, 2020 the ABL facility was amended to increase the credit limit up to $161.0 million.

No amounts were outstanding under this facility as of July 4, 2021 and January 3, 2021.

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 July 4, 2021 and January 3, 2021, $109.0 million and $106.4 million, respectively, was available for borrowing, net of letters of credit.

The facility bears interest at an annual rate based on LIBOR plus an applicable margin of 1.50% (ranging from 1.50% to 2.00% based on availability) or the prime rate plus an applicable margin of 0.50% (ranging from 0.50% to 1.00%).

Had the Company elected to use the Prime rate, the interest rate on the facility as of April 4, 2021 and March 29, 2020, would have been 3.75% and 3.75%, respectively.

The Company elected to use the LIBOR rate, the interest rate on the ABL facility as of April 4, 2021 (Successor) and was 1.61%.

The Company elected to use the LIBOR rate as of March 29, 2020 (Predecessor) and the interest rate was 2.36%.

The ABL facility is also subject to unused line fees (0.5% at April 4, 2021) and other fees and expenses.

Standby letters of credit in the amount of $14.1 million have been issued as of April 4, 2021 and January 3, 2021.

Had the Company elected to use the Prime rate, the interest rate on the facility as of July 4, 2021 and June 28, 2020, would have been 3.75% and 3.75%, respectively.

The Company elected to use the LIBOR rate, the interest rate on the ABL facility as of July 4, 2021 was 1.60%.

The Company elected to use the LIBOR rate as of June 28, 2020 and the interest rate was 1.66%.

The ABL facility is also subject to unused line fees (0.5% at July 4, 2021) and other fees and expenses.

Standby letters of credit in the amount of $11.6 million and $14.1 million have been issued as of July 4, 2021 and January 3, 2021, respectively.

The standby letters of credit are primarily issued for insurance purposes.

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The First Lien Term Loan bears interest at an annual rate based on either LIBOR plus an applicable margin of 3.50%, or prime rate plus an applicable margin of 2.50%.

The interest rate on the First Lien Term Loan as of March 29, 2020 was 5.10%.

The interest rate on the First Lien Term Loan as of June 28, 2020 was 5.10%.

In connection with Amendment No.

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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 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 Bridge Credit Agreement bears interest at an annual rate based on 4.25% Base plus 1 month LIBOR with scheduled incremental increases to the base rate, as defined in the Bridge Credit Agreement.

The Bridge Credit Agreement bears interest at an annual base rate of 4.25% plus 1 month LIBOR with scheduled incremental increases to the base rate, as defined in the Bridge Credit Agreement.

The loan converts into an Extended Term Loan if the Loan remains open 365 days after the closing date.

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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.

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 Company entered into Amendment No.

2 to the Credit Agreement ("Amendment No.

2") which provided additional operating flexibility and revisions to certain restrictive covenants.

Pursuant to the terms of Amendment No.

2, the Company raised $720 million in aggregate principal of Term Loan B which bears interest at LIBOR plus 3.00%, and extended the maturity of the Credit Agreement to January 20, 2028.

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.

The proceeds were used, together with cash on hand and proceeds from our exercised warrants, to redeem the outstanding principal amount of existing Term Loan B and Bridge Credit Agreement of $410 million and $358 million, respectively.

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The Company incurred debt issuance costs and original issuance discounts of $8.4 million.

The interest rate on this instrument was 3.11% as of April 4, 2021.

The First Lien Term Loan, the Secured First Lien Note, Term Loan B, and the ABL facility are collateralized by substantially all of the assets and liabilities of the Company.

The credit agreements contain certain affirmative and negative covenants as to operations and the financial condition of the Company.

The Company was in compliance with its financial covenant as of April 4, 2021.

The interest rate on Term Loan B was 3.09% as of July 4, 2021.

On June 22, 2021, the Company entered into Amendment No.

3 to the Credit Agreement ("Amendment No.

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 $791.2 million remains outstanding as of July 4, 2021.

The Company incurred additional debt issuance costs and original issuance discounts of $0.7 million related to the incremental funding.

The First Lien Term Loan, the Secured First Lien Note, Term Loan B, and the ABL facility are collateralized by substantially all of the assets of UBH and its subsidiaries, including equity interests in certain of UBH’s subsidiaries.

The credit agreements contain certain affirmative and negative covenants as to operations and the financial condition of UBH and its subsidiaries.

UBH and its subsidiaries were in compliance with its financial covenant as of July 4, 2021.

On July 2, 2021, the Company entered into an agreement with Bank of America Leasing & Capital, LLC, whereby the Company agreed to sell and lease-back certain manufacturing equipment and warehouse/distribution equipment for $13.0 million.

This was accounted for as a financing transaction.

The terms of the sale leaseback transaction are for 60 months at an interest rate of 3.26%.

Derivative Financial Instruments

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The Company entered into this transaction to reduce its exposure to changes in cash flows associated with its variable rate debt and has designated this derivative as a cash flow hedge.

At April 4, 2021, the effective fixed interest rate on the long-term debt hedged by this contract was 3.47%.

At July 4, 2021, the effective fixed interest rate on the long-term debt hedged by this contract was 3.53%.

For further treatment of the Company’s interest rate swap, refer to Note 10.

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The agreement with M&T Bank was amended in January 2020 so that the Company guaranteed up to 25% of the greater of the aggregate principal amount of loans outstanding on the payment date or January 1st of the subject year.

The outstanding balance of loans guaranteed was $6.2 million and $6.6 million at April 4, 2021 and January 3, 2021, respectively, all of which was on balance sheet.

The outstanding balance of loans guaranteed was $5.6 million and $6.6 million at July 4, 2021 and January 3, 2021, respectively, all of which was the Company's consolidated balance sheets.

These loans are collateralized by the routes for which the loans are made.

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Other Notes Payable and Capital Leases

During the first fiscal quarter of 2020, the Company closed on the acquisition of Kitchen Cooked and the acquisition included a deferred purchase price of $2.0 million, of which $1.0 million is still outstanding as of April 4, 2021 and January 3, 2021.

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 is outstanding as of April 4, 2021 and January 3, 2021, respectively.

During the first fiscal quarter of 2020, the Company closed on the acquisition of Kitchen Cooked and the acquisition included a deferred purchase price of $2.0 million, of which $1.0 million was outstanding as of July 4, 2021 and January 3, 2021.

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 July 4, 2021 and January 3, 2021, respectively.

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.

During fiscal the first quarter of 2021, the Company sold an additional $2.3 million of notes receivable from IOs on its books for $2.5 million to a financial institution.

Due to the structure of the transactions, the sale 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;

During the first quarter of fiscal 2021, the Company sold an additional $2.3 million of notes receivable from IOs on its books for $2.5 million to a financial institution.

During the second quarter of fiscal 2021, the Company sold an additional $5.6 million of notes receivable from IOs on its books for $5.8 million to a financial institution.

Due to the structure of the transactions, the sales 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.

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Accordingly, the Company has the ability to recover substantially all of the outstanding loan value upon default.

Interest expense for the thirteen weeks ended April 4, 2021 (Successor) was $10.9 million, $7.6 million of which was related to the Company’s credit facility and other long-term debt, of which $2.9 million was related to amortization of deferred financing fees, and $0.4 million of which was related to IO loans.

Interest expense for the thirteen weeks ended March 29, 2020 (Predecessor) was $9.6 million, $8.3 million of which was related to the Company’s credit facility and other long-term debt, $0.7 million of which was related to amortization of deferred financing fees, and $0.6 million of which was related to IO loans.

The interest expense on IO loans is a pass-through expense that has an offsetting interest income within Other (expense) income.

Interest expense for the thirteen weeks ended July 4, 2021 (Successor) was $7.9 million, $7.3 million of which was related to the Company’s credit facility and other long-term debt, of which $0.3 million was related to amortization of deferred financing fees, and $0.3 million of which was related to IO loans.

Interest expense for the thirteen weeks ended June 28, 2020 (Predecessor) was $10.0 million, $8.7 million of which was related to the Company’s credit facility and other long-term debt, $0.7 million of which was related to amortization of deferred financing fees, and $0.6 million of which was related to IO loans.

Interest expense for the twenty-six weeks ended July 4, 2021 (Successor) was $18.8 million, $14.9 million of which was related to the Company’s credit facility and other long-term debt, of which $3.2 million was related to amortization of deferred financing fees, and $0.7 million of which was related to IO loans.

Interest expense for the twenty-six weeks ended June 28, 2020 (Predecessor) was $19.6 million, $17.1 million of which was related to the Company’s credit facility and other long-term debt, $1.3 million of which was related to amortization of deferred financing fees, and $1.2 million of which was related to IO loans.

The interest expense on IO loans is a pass-through expense that has an offsetting interest income within Other income (expense).

Off-Balance Sheet Arrangements

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Additionally, the Company has outstanding purchase commitments for specific quantities at fixed prices for certain key ingredients to economically hedge commodity input prices.

These purchase commitments totaled $81.2 million as of April 4, 2021.

The Company has recorded purchase commitment losses totaling $— million and $0.3 million for the thirteen weeks ended April 4, 2021 (Successor), and the thirteen weeks ended March 29, 2020 (Predecessor), respectively.

These purchase commitments totaled $64.6 million as of July 4, 2021.

The Company has recorded purchase commitment gain (losses) totaling $0.0 million and $(0.7) million for the thirteen weeks ended July 4, 2021 (Successor), and the thirteen weeks ended June 28, 2020 (Predecessor), respectively.

The Company has recorded purchase commitment gain (losses) totaling $0.0 million and $(1.0) million for the twenty-six weeks ended July 4, 2021 (Successor), and the twenty-six weeks ended June 28, 2020 (Predecessor), respectively.

IO Guarantees-Off-Balance Sheet

The Company partially guarantees loans made to IOs by Cadence Bank for the purchase of routes.

The outstanding balance of loans guaranteed was $3.3 million and $4.1 million at April 4, 2021 and January 3, 2021, respectively, all of which was recorded by the Company as an off balance sheet arrangement.

The outstanding balance of loans guaranteed was $2.8 million and $4.1 million at July 4, 2021 and January 3, 2021, respectively, all of which was recorded by the Company as an off balance sheet arrangement.

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.

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The Company partially guarantees loans made to IOs by Bank of America for the purchase of routes.

The outstanding balance of loans guaranteed that were issued by Bank of America was $8.4 million and $7.1 million at April 4, 2021 and January 3, 2021, respectively, which are off balance sheet.

The outstanding balance of loans guaranteed that were issued by Bank of America was $10.0 million and $7.1 million at July 4, 2021 and January 3, 2021, respectively, which are off balance sheet.

As discussed in Note 8.

"Long-Term Debt", the Company also sold notes receivable on its books to Bank of America during fiscal 2019 and fiscal 2021, which the Company partially guarantees.

The outstanding balance of notes purchased by Bank of America at April 4, 2021 and January 3, 2021 was $17.4 million and $16.5 million, respectively.

Due to the structure of the transaction, the sale did not qualify for sale accounting treatment, as such the Company records the notes payable obligation owed by the IOs to the financial institution on its books;

the corresponding note receivable also remained on the Company’s books.

The outstanding balance of notes purchased by Bank of America at July 4, 2021 and January 3, 2021 was $21.0 million and $16.5 million, respectively.

Due to the structure of the transactions, the sales did not qualify for sale accounting treatment, as such the Company records the notes payable obligation owed by the IOs to the financial institution on its consolidated balance sheets;

the corresponding note receivable also remained on the Company’s consolidated balance sheets.

The maximum amount of future payments the Company could be required to make under these guarantees equates to 25% of the outstanding loan balance on the first day of each calendar year plus 25% of the amount of any new loans issued during such calendar year.

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New Accounting Pronouncements

"Operations and Summary of Significant Accounting Policies," to the unaudited condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q.

"Operations and Summary of Significant Accounting Policies," to the unaudited consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Application of Critical Accounting Policies and Estimates

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We sell to supermarkets, mass merchandisers, club warehouses, convenience stores and other large-scale retailers, merchants, distributors, brokers, wholesalers, and IOs (which are third party businesses).

These revenue contracts generally have a single performance obligation.

These revenue contracts generally have a single performance obligation, and the Company recognizes revenue when such obligation is satisfied, as described below.

Revenue, which includes shipping and handling charges billed to the customer, is reported net of variable consideration and consideration payable to customers, including applicable discounts, returns, allowances, trade promotion, consumer coupon redemption, unsaleable product, and other costs.

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Our policy is to classify assessments, if any, for tax related interest as interest expense and penalties as selling and administrative expenses.

As of April 4, 2021, and January 3, 2021, no liability for unrecognized tax benefits was required to be reported.

As of July 4, 2021, and January 3, 2021, no liability for unrecognized tax benefits was required to be reported.

We do not expect any significant changes in our unrecognized tax benefits in the next year.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis