What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2022-03-03 compared with 2021-03-18 · 283 added, 208 removed, 349 unchanged (58% of the section changed)

5 unchanged sentences

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

Our fiscal year 2019 ended December 29, 2019 and was a fifty-two-week period and our fiscal year 2020 ended January 3, 2021 and was a fifty-three-week fiscal year.

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 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).

We are a leading manufacturer, marketer, and distributor of high-quality, branded snacking products in the United States.

We produce a broad offering of salty snacks, including potato chips, pretzels, cheese snacks, veggie snacks, pork skins, pub/party mixes, and other snacks.

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.

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.

We operate 14 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 more than 1,600 direct-store-delivery (“DSD”) routes.

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.

Our company was founded in 1921 in Hanover, Pennsylvania, and benefits from 100 years of brand awareness and heritage in the salty snack industry.

12 unchanged sentences

salty snacks category, within the broader $105 billion market for U.S.

The salty snacks category has grown retail sales at an approximately 5.6% compound annual growth rate (“CAGR”) over the last four years, including the increased in-home consumption of salty snacks due to COVID-19 during 2020.

During fiscal 2020, snacking occasions are on the rise as consumers increasingly seek out convenient, delicious snacks for both on-the-go and at-home lifestyles.

According to data from the Hartman Group, The Consumer Goods Forum, and IRI, approximately 50% of U.S.

snack foods as of January 2, 2022.

The salty snacks category has grown retail sales at an approximately 6.4% compound annual growth rate (“CAGR”) from 2017 through 2021 with a major spike in 2020 driven by COVID-19 consumption.

In the last few years snacking occasions have been on the rise as consumers increasingly seek out convenient, delicious snacks for both on-the-go and at-home lifestyles.

According to data from the Hartman Group, The Consumer Goods Forum, and IRI as of January 2, 2022, approximately 50% of U.S.

eating occasions are snacks, with 95% of the U.S.

6 unchanged sentences

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

For the 52 weeks ended December 27, 2020, U.S.

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.

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.

9 unchanged sentences

We deferred $7.8 million of payroll tax deposits per the CARES Act.

The deferred payroll taxes must be deposited in two installments, with half due on December 31, 2021 and the remainder 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 due on December 31, 2022.

We continue to evaluate the impact of the CARES Act;

2 unchanged sentences

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 combined fifty-three weeks period ended January 3, 2021 was 4.9%, down from 5.5% during the same timeframe in fiscal 2019.

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 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.

2 unchanged sentences

"Derivative Financial Instruments and Purchase Commitments" to our audited consolidated financial statements included under Part II, Item 8 of this Annual Report on Form 10-K (our "Audited Financial Statements") for additional information on debt, derivative and purchase commitment activity.

LIBOR Transition – As of January 3, 2021, we had $780.0 million in variable rate indebtedness, up from $650.6 million at December 29, 2019, all or a portion of which uses 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.

LIBOR Transition – As of January 2, 2022, we had $823.2 million in variable rate indebtedness, up from $780.0 million at January 3, 2021, all or a portion of which uses London Inter Bank Offered Rate ("LIBOR") as a benchmark for establishing applicable rates.

As announced in July 2017, LIBOR was phased out on December 31, 2021 for new contracts.

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.

7 unchanged sentences

Demand for product increased significantly for several weeks in late March and into April 2020 as customers “pantry-loaded” in response to “shelter-in-place” measures that were enacted in many markets.

Following that initial spike, in the weeks that followed, demand for product has continued to out-pace prior year rates as families have favored “at-home” dining at a greater rate than pre-pandemic levels.

Following that initial spike, in the weeks that followed, demand for product continued to out-pace prior year rates as families have favored “at-home” dining at a greater rate than pre-pandemic levels.

We have serviced that demand by increasing production and distribution activities.

Our strategic manufacturing capabilities and DSD distribution network have allowed us to effectively service the increased demand and be responsive to evolving market dynamics driven by changes in consumer behavior.

During this time we picked up a significant number of new customers and have experienced a high level of repeat customers within fiscal year 2021.

We will continue to monitor customer and consumer activity and adapt our plans as necessary to best service the business.

Recent Developments and Significant Items Affecting Comparability

On November 19, 2019, we entered into a stock purchase agreement to acquire all outstanding shares of common stock and certain real estate assets of Kitchen Cooked Inc., an Illinois corporation (“Kitchen Cooked”).

We acquired Kitchen Cooked to expand our distribution and production capacity in Illinois and the surrounding area.

The acquisition closed on December 30, 2019 when we made a cash payment of $6.9 million and recorded $2.0 million in deferred payment obligations for the acquisition of the outstanding shares of Kitchen Cooked as well as certain real estate supporting its operations.

On October 21, 2019, we closed on our acquisition of Kennedy Endeavors, LLC (“Kennedy”) from Conagra Brands Inc.

The Company paid the aggregate purchase price of approximately $138.1 million.

Kennedy consists of Tim’s Cascade Snacks and Snyder of Berlin, which are snack food manufacturers.

1 unchanged sentence

The acquisition provided us with the second largest DSD network for branded salty snacks in the Pacific Northwest, a leased, regional production facility outside of Seattle, Washington, and increased scale with retailers in the Western United States.

We also acquired regional DSD routes and a production facility in Berlin, PA, which are highly complementary with our existing business in that region.

Our Consolidated Statements of Operations and Comprehensive Income include the operations of this business from October 21, 2019 through December 29 in 2019 and for all of fiscal year 2020.

On November 2, 2020, we completed the acquisition of certain assets from Conagra Brands, Inc.

related to the H.K.

Anderson business, a leading brand of peanut butter-filled pretzels for approximately $8 million.

The transaction enables us to jump-start our entry into the growing filled pretzel segment, leveraging the synergies of our salty snack platform.

We also acquired regional DSD routes and a production facility in Berlin, Pennsylvania, which are highly complementary with our existing business in that region.

On November 11, 2020 the Company caused its subsidiaries, UQF and Heron, to enter into a Stock Purchase Agreement (the "Truco Acquisition") among UQF, Heron, Truco Holdco Inc.

7 unchanged sentences

The OTB IP was initially recognized and measured by the Company based on its purchase price of $79.0 million since it was acquired in asset purchase and is treated as an indefinite lived intangible assets.

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.

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.

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

On November 2, 2021, the Company announced that its subsidiaries, entered into a definitive agreement to acquire R.W.

Garcia Holdings, LLC and its' wholly-owned subsidiary R.W.

Garcia Co., Inc.

("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.

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.

Commodity Trends

4 unchanged sentences

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 we expect to continue into 2021.

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.

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.

The Company looks to offset rising costs through increasing manufacturing and distribution efficiencies as well as through price increases to our customers, although it is unclear whether historic customer sales levels will be maintained at these higher prices.

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

While the costs of our principal raw materials fluctuate, we believe there will continue to be an adequate supply of the raw materials we use and that they will generally remain available from numerous sources.

Market factors including supply and demand may result in higher costs of sourcing those materials.

Independent Operator Conversions

2 unchanged sentences

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 79% and 21%, respectively as of January 3, 2021 versus a 77% and 23% ratio for IOs and RSPs respectively as of December 30, 2019.

We took a brief pause in 2020 due to COVID-19 and our ERP implementation.

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

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.

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.

As we convert a large number of routes in a year, there is a meaningful decrease in the selling 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, 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.

The net impact is a reduction in selling expenses and a decrease in net sales and gross profit.

1 unchanged sentence

Controls and Procedures

Prior to the consummation of the Business Combination, we were not currently required to comply with the SEC’s rules implementing Section 404 of the Sarbanes-Oxley Act and are 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.

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.

Since the consummation of the Business Combination, we are required to comply with the SEC’s rules implementing Section 302 of the Sarbanes-Oxley Act, which require our management to certify financial and other information in our quarterly and annual reports.

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 are not required to have our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting under Section 404 until our first annual report subsequent to our ceasing to be an “emerging growth company” within the meaning of Section 2(a) of the Securities Act.

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.

Results of Operations

The following tables present selected financial data for the Successor period from August 29, 2020 through January 3, 2021, the Predecessor period from December 30, 2019 through August 28, 2020, as combined for the year ended January 3, 2021 and the years ended December 29, 2019 and December 30, 2018.

We have prepared our discussion of the results of operations by comparing the results of the combined Successor period from August 29, 2020 through January 3, 2021 and the Predecessor period from December 30, 2019 through August 28, 2020 and the years ended December 29, 2019 and December 30, 2018.

The following tables present selected financial data for the year ended January 2, 2022, fiscal periods ended January 3, 2021 and August 28, 2020, and year ended December 29, 2019.

We have prepared our discussion of the results of operations by comparing the results for the year ended January 2, 2022, the combined successor fiscal period from August 29, 2020 through January 3, 2021 and the Predecessor period from December 30, 2019 through August 28, 2020, and the year ended December 29, 2019.

We believe this approach provides the most meaningful basis of comparison and is more useful in identifying current business trends for the periods presented.

The combined results of operations included in our discussion below are not considered to be prepared in accordance with U.S.

GAAP and have not been prepared as pro forma results under applicable regulations, may not reflect the actual results we would have achieved had the Business Combination occurred at the beginning of fiscal 2019, and should not be viewed as a substitute for the results of operations of the Predecessor and Successor periods presented in accordance with U.S.

GAAP and have not been prepared as pro forma results under applicable regulations, and may not reflect the actual results we would have achieved had the Business Combination occurred at the beginning of fiscal 2019, and should not be viewed as a substitute for the results of operations of the Predecessor and Successor periods presented in accordance with U.S.

Successor Predecessor

For the year ended January 2, 2022 From

August 29, 2020

January 3, 2021 From

December 30, 2019

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)

Successor Predecessor Non-GAAP Combined

7 unchanged sentences

Gross profit 105,671 227,067 332,738

Selling and administrative expenses

Selling, general and administrative expenses

Selling 63,616 131,579 195,195

Administrative 43,871 64,050 107,921

Total selling and administrative expenses 107,487 195,629 303,116

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

6 unchanged sentences

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)

4 unchanged sentences

Net (loss) income attributable to controlling interest $ (99,930) $ 3,420 $ (96,510)

Non-GAAP Combined Predecessor

(in thousands) For the year ended January 3, 2021 For the year ended December 29, 2019 For the year ended December 30, 2018

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

1 unchanged sentence

Gross profit 383,909 332,738 253,798

Selling and administrative expenses

Selling, general and administrative expenses

Selling 249,352 195,195 163,589

Administrative 107,921 64,723 68,018

Total selling and administrative expenses 303,116 228,312 251,392

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 (loss) on disposal of property, plant and equipment 188 6,028 (2,312)

Gain on disposal of property, plant and equipment 1,133 188 6,028

Gain on sale of routes, net 731 2,013 7,232

1 unchanged sentence

Income from operations 10,566 31,823 38,746

Other (expense) income

Other income (expense)

Interest expense (34,708) (39,960) (48,388)

Other (expense) income 3,551 (787) (576)

Other (expense) income, net (40,747) (48,964) (45,108)

Loss before taxes (8,924) (10,218) (25,725)

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 loss (12,630) (13,364) (27,644)

Net income (loss) 7,998 (104,481) (13,364)

Net loss (income) attributable to noncontrolling interest 12,557 7,971 (2,808)

Net loss attributable to controlling interest $ (4,659) $ (16,172) $ (30,500)

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 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.

Net sales for the year ended January 2, 2022 increased $216.4 million or 22.4% over the combined fiscal year 2020.

The increase in net sales for the 52 weeks ended January 2, 2022 was related to the acquisitions of H.K.

Anderson, Festida, Vitner's, RW Garcia and Truco, along with increased sales across customers and geographies resulting from customer programs and pricing actions put in place to help offset inflation pressures on higher input and supply chain costs in fiscal year 2021, partially offset by an extra week of sales in fiscal 2020, which represented $15.9 million.

The Company lapped higher sales that were heightened by increased in-home consumption of salty snacks due to COVID-19 and has kept a high rate of repeat customers.

IO discounts increased from $96.7 million for the combined year ended January 3, 2021 to $109.7 million for the corresponding year ended January 2, 2022.

Excluding the impacts of acquisitions and changes to IO discounts, total net sales increased 0.8% for the year ended January 2, 2022 versus the corresponding period in 2020.

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

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 ®.

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.

For the year ended January 2, 2022, excluding the impact of higher IO discounts and brands acquired through our H.K.

Anderson, Vitner's, Truco, Festida, and R.W.

Garcia acquisitions, Power Brand sales increased by approximately 3%, while Foundation Brand sales decreased approximately 3% from 2020.

Growth in Power Brands was led by Utz®, Zapp’s®, TORTIYAHS!® and Golden Flake Pork® Skins brands, with strong increases across Core, Expansion and Emerging Geographies.

The decline in Foundation Brands reflects our strategy to focus on our Power Brands .

Cost of goods sold and Gross profit

Gross profit was $383.9 million for the year ended January 2, 2022, $105.7 million for the Successor period August 29, 2020 through January 3, 2021, and $227.1 million from for the Predecessor period December 30, 2019 through August 28, 2020.

Gross profit for the year ended January 2, 2022 increased $51.2 million or 15.4% over the comparable period in 2020.

The increase in gross profit for fiscal year 2021 was driven by higher sales, contributions from the acquisitions of H.K.

Anderson, Festida, Vitner's, RW Garcia and Truco, leveraging our existing infrastructure and available capacity, as well as the ramp-up of productivity initiatives driving improvement in manufacturing capability.

Our gross profit margin was 32.5% for the fiscal year 2021 versus 34.5% for the combined fiscal year ended 2020.

IO discounts increased from $96.7 million in fiscal 2020 to $109.7 million in fiscal 2021 primarily as the result of continued route conversions to independent operators, accounting for about 1.1% of the decline in gross profit margin.

The remaining reduction of gross profit margin was primarily driven by labor, freight and commodity inflation.

In response to these inflationary pressures the Company initiated pricing actions, which due to timing, did not fully cover the incremental costs in fiscal 2021.

Selling, general and administrative expenses

Selling, general and administrative expenses were $375.2 million for the year ended January 2, 2022 with $107.5 million for the Successor period August 29, 2020 through January 3, 2021, and $195.6 million for the Predecessor period December 30, 2019 through August 28, 2020.

Selling, general and administrative expenses for the year ended January 2, 2022 increased $72.1 million or 23.8% over the comparable period in 2020.

The increased expenses in fiscal year 2021 resulted mostly from higher operational costs related to H.K.

Anderson, Festida, Vitner's, RW Garcia and Truco acquisitions, along with inflationary pressures and higher supply chain costs largely driven by higher freight costs, partially offset by an extra week in fiscal year 2020 and by savings due to the transition of Company owned DSD routes to independent operators.

Gain on sale of assets

Gain on sale of assets was $1.9 million for the year ended January 2, 2022, $0.9 million for the Successor period August 29, 2020 through January 3, 2021 and $1.3 million for the Predecessor period December 30, 2019 through August 28, 2020.

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.

Other income (expense), net

Other income (expense), net was $5.5 million for the year ended January 2, 2022, $(107.2) million for the Successor period August 29, 2020 through January 3, 2021, and $(25.4) million for the Predecessor period December 30, 2019 through August 28, 2020.

The primary change was driven by the evaluation of the company's warrants.

In fiscal year 2021, the warrants resulted in a gain of $36.7 million versus a loss of $91.9 million for fiscal year 2020.

Also significant was interest expense of $(34.7) million for the year ended January 2, 2022 compared to $(13.3) million for the Successor period August 29, 2020 through January 3, 2021 and $(26.7) million for the Predecessor period December 30, 2019 through August 28, 2020.

Income taxes were an expense of $8.1 million for the year ended January 2, 2022, a benefit of $(0.3) million for the Successor period August 29, 2020 through January 3, 2021, and an expense of $4.0 million for the Predecessor period December 30, 2019 through August 28, 2020 .

53 week Year Ended January 3, 2021 (Successor and Predecessor) versus 52 week Year Ended December 29, 2019 (Predecessor)

Net sales was $325.6 million for the Successor period, $638.7 million from December 30, 2019 through August 28, 2020, and $768.2 million for the year ended December 29, 2019.

Net sales were $325.6 million for the Successor period, $638.7 million from December 30, 2019 through August 28, 2020, and $768.2 million for the year ended December 29, 2019.

Net sales for the combined year ended January 3, 2021 increased $196.1 million or 25.5% over the comparable period in 2019.

2 unchanged sentences

The 53rd week represents an increase of approximately $15.9 million.

IO discounts increased from $77.2 million for the for the year ended December 29, 2019 to $96.7 million for the corresponding combined year ended January 3, 2021.

IO discounts increased from $77.2 million for the year ended December 29, 2019 to $96.7 million for the corresponding combined year ended January 3, 2021.

Excluding the impacts of acquisitions and changes to IO discounts, total net sales grew 16.7% for the combined year ended January 3, 2021 versus the corresponding period in 2019.

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

Power brands include our iconic heritage Utz brand;

craft brands such as ON THE BORDER®, Zapp’s ®, Golden Flake ® Pork Skins, and Hawaiian ®;

Power brands include our iconic heritage Utz brand and iconic ON THE BORDER®;

craft brands such as Zapp’s ®, Golden Flake ® Pork Skins, and Hawaiian ®;

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

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

and selected licensed brands such as TGI Fridays ®.

Our Foundation brands are comprised of several regional brands, including Bachman ®, Golden Flake ® Chips and Cheese, Tim’s Cascade ® Snacks , Snyder of Berlin ®, “ Dirty ” Potato Chips®, and selected licensed brands Herdez ® as well as other partner and private label brands.

For the combined year ended January 3, 2021, excluding the impact of higher IO discounts and brands acquired through our Kennedy, Kitchen Cooked, H.K.

1 unchanged sentence

Growth in Power Brands was led by Utz®, Zapp’s®, TORTIYAHS!® and Golden Flake Pork® Skins brands, with strong increases across Core, Expansion and Emerging Geographies.

The decline in Foundation Brands reflects our strategy to focus on our Power Brands and continued softness in foodservice, up-and-down-the-street customers, and the convenience channel due to COVID-19.

The decline in Foundation Brands reflects our strategy to focus on our Power Brands and continued softness in food service, up-and-down-the-street customers, and the convenience channel due to COVID-19.

Conversely, our Power Brands have a stronger presence in large format channels, which have performed well during this time period.

7 unchanged sentences

IO discounts increased from $77.2 million in fiscal 2019 to $96.5 million in fiscal 2020, reducing gross profit by $19.3 million.

Selling and administrative expense

Selling and administrative expenses were $107.5 million for the Successor period, $195.6 million from December 30, 2019 through August 28, 2020, and $228.3 million for the year ended December 29, 2019.

Selling and administrative expenses for the combined year ended January 3, 2021 increased $74.8 million or 33% over fiscal 2019.

Selling, general and administrative expenses

Selling, general and administrative expenses were $107.5 million for the Successor period, $195.6 million from December 30, 2019 through August 28, 2020, and $228.3 million for the year ended December 29, 2019.

Selling, general and administrative expenses for the combined year ended January 3, 2021 increased $74.8 million or 33% over fiscal 2019.

The increased expenses in fiscal 2020 were driven by higher transaction-related service provider fees, higher operational costs related to incremental sales volume, operating expense of the acquired Kennedy, Kitchen Cooked, H.K.

Anderson and Truco businesses, higher incentive compensation expense and an additional 53rd week.

Gain (loss) on sale of assets

Gain on sale of assets

Gain on sale of assets was $0.9 million for the Successor period, $1.3 million from December 30, 2019 through August 28, 2020, and $13.3 million for the year ended December 29, 2019.

3 unchanged sentences

Other expense, net was $107.2 million for the Successor period, $25.4 million from December 30, 2019 through August 28, 2020, and $49.0 million for the year ended December 29, 2019.

The Company incurred $2.5 million of expenses in connection with the repayment of the Senior Secured First Lien Note and incremental interest of $1.1 million and deferred financing fees that were expensed of $4.7 million related to the bridge loan in connection with the acquisition of Truco during the Successor period.

During the Successor period the Company recognized an expense of $91.9 million due to the remeasurement of the warrant liability.

The Warrants were not part of the Predecessor and therefore no such expense is shown in the Predecessor periods.

In addition, the Company incurred $2.5 million of expenses in connection with the repayment of the Senior Secured First Lien Note and incremental interest of $1.1 million and deferred financing fees that were expensed of $4.7 million related to the bridge loan in connection with the acquisition of Truco during the Successor period.

Interest expense decreased $8.4 million for the combined year ended January 3, 2021, versus the fiscal year 2019.

1 unchanged sentence

Inco me taxes were a benefit of $0.3 million for the Successor period, expense of $4.0 million for December 30, 2019 through August 28, 2020, and expense of $3.1 million for the year ended December 29, 2019 .

Year Ended December 29, 2019 (Predecessor) versus Year Ended December 30, 2018 (Predecessor)

Net sales for fiscal 2019 compared to fiscal 2018 remained relatively flat, with a $3.8 million and 0.5% decrease year over year.

The decrease in net sales was related to the conversion of RSP operated routes to IOs which resulted in additional discounts and commissions offered to IOs.

IO discounts increased from $58.0 million in fiscal 2018 to $77.2 million in fiscal 2019, reducing net sales by $19.2 million for the period.

This conversion was mostly offset by the fourth quarter results associated with the acquisition of Kennedy, which closed on October 21, 2019.

Excluding the offsetting impact of the Kennedy Acquisition and changes in IO discounts, Power brands, which accounted for approximately 78% of the overall sales, increased by approximately 2%.

This was partially offset by a decrease in sales of approximately 5% within the Foundation brands, which accounted for the remaining 22%.

Growth in Power brands was led by the Utz, Zapp’s and Golden Flake Pork Skins brands, partially offset by the negative impact of a strategic realignment of the Boulder Canyon and TGI Fridays brands as part of the Inventure Foods integration process.

The decrease in sales of Foundation brands primarily resulted from our strategic decision to exit certain low-margin, non-core private label businesses acquired through previous acquisitions.

Cost of goods sold and Gross profit

Our gross profit for fiscal 2019 was $253.8 million, a $12.9 million and 4.8% decrease compared to gross profit of $266.7 million for fiscal 2018.

The decrease in gross profit in fiscal year 2019 was made up of a net $16.8 million reduction due to conversion of RSP routes to IOs which increased IO discounts and decreased cost of stale and damaged product, $5.4 million increase due to the Kennedy Acquisition, and $1.5 million reduction primarily due to higher input costs.

Our gross profit margin was 33.0% and 34.5% for fiscal years 2019 and 2018, respectively.

The decrease in gross profit margin was primarily driven by the conversion of RSP routes to IOs as well as lower overall gross profit margins of Kennedy and higher input costs.

IO discounts increased from $58.0 million in fiscal 2018 to $77.2 million in fiscal 2019, reducing gross profit by $19.2 million for the period.

Excluding the impact of increased IO discounts due to DSD route conversions, gross profit as a percentage of net sales would have increased by 0.2% from 34.5% to 34.7%.

Selling and administrative expense

Our selling and administrative expenses for fiscal 2019 were $228.3 million, a $23.1 million and 9.2% decrease, compared to selling and administrative expenses of $251.4 million for fiscal 2018.

The decrease in selling and administrative expenses for fiscal year 2019 was primarily made up of an $18.0 million reduction driven by conversion of RSP operated routes to IOs over the course of fiscal years 2018 and 2019.

IO conversions resulted in decreased RSP compensation and benefit costs, fleet expenses, and sales management costs in fiscal year 2019.

Selling and administrative expenses also decreased by $6.7 million primarily due to a full year of benefit from integration-related cost savings realized from the acquisition of Inventure Foods.

These decreases were partially offset by $1.6 million of increased marketing investments for sponsorships in fiscal year 2019.

Gain (loss) on sale of assets

Our gain on sale of assets for fiscal 2019 was $13.3 million, a $9.2 million and 225.8% increase, compared to our gain on sale of assets of $4.1 million for fiscal 2018.

The increase in gain on sale of assets for fiscal year 2019 was primarily driven by the sale of one of our plants for a $4.6 million gain, compared to a net loss realized on the disposal of computer hardware and software and other certain assets in 2018.

In addition, gain on sale of routes to IOs contributed $0.9 million to the increase in gain on sale of assets for fiscal year 2019.

Other (expense) income, net

Other expense, net for fiscal 2019 was $49.0 million, $48.4 million of which was related to interest expense.

Of the 2019 interest expense, $43.7 million was related to our credit facility and other long-term debt, $2.1 million was related to deferred financing fees, and $2.6 million was related to Notes Payable — IO loans.

The interest expense on Notes Payable — IO loans is a pass-through expense that has an offsetting interest income within other income, net, which is paid by such IO.

Other expense, net for fiscal 2018 was $45.1 million, $45.7 million of which was related to interest expense.

Of the 2018 interest expense, $42.3 million was related to our credit facility and other long-term debt, $2.4 million was related to deferred financing fees, and $0.7 million was related to IO loans.

The total interest expense increased by $2.7 million or 5.8%.

This change was primarily driven by an increase in the average LIBOR rate on our variable rate debt and our pass-through interest expense on notes payable related to the financing of the sale of IO routes, which were partially offset by lower interest expense in connection with the repayment of our Second Lien Term Loan in fiscal year 2019.

Income taxes for the fiscal year 2019 was $3.1 million, a $1.2 million increase, compared to income taxes of $1.9 million for fiscal 2018, which was primarily due to the mix of income related to taxable entities and nontaxable partnerships.

Under our predecessor structure, we were generally not subject to entity-level taxes for income generated through our limited liability companies that were taxed as operating partnerships;

consequently, our income tax expense for the predecessor periods relates primarily to certain corporate subsidiaries that are subject to corporate income taxes.

Non-GAAP Financial Measures

23 unchanged sentences

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 tables provides a reconciliation from Net (Loss) Income to EBITDA and Adjusted EBITDA the fiscal periods ended January 3, 2021 and August 28, 2020, and years ended December 29, 2019 and December 30, 2018:

Successor Predecessor Non-GAAP Combined Predecessor

The following table provides a reconciliation from Net (Loss) Income for the Successor period from August 29,2020 through January 3, 2021 and the Predecessor period from December 30, 2019 through August 28, 2020 and for the year ended January 3, 2021 (Combined).

Successor Predecessor Combined

(dollars in millions) From

2 unchanged sentences

December 30, 2019

August 28, 2020 For the year ended January 3, 2021 For the year ended December 29, 2019 For the year ended December 30, 2018

August 28, 2020 For the year ended January 3, 2021

Net (Loss) Income $ (107.9) $ 3.4 $ (104.5)

The following table provides a reconciliation from Net Income (Loss) to EBITDA and Adjusted EBITDA the year ended January 2, 2022, combined period ended January 3, 2021, and year ended December 29, 2019:

Successor Non-GAAP Combined Predecessor

(dollars in millions) For the year ended January 2, 2022 For the year ended January 3, 2021 For the year ended December 29, 2019

Net income (loss) $ 8.0 $ (104.5) $ (13.4)

Plus non-GAAP adjustments:

10 unchanged sentences

Financing-Related Costs (5)

(Gain) loss on remeasurement of warrant liability (6)

(36.7) 91.9 —

Adjusted EBITDA 156.2 133.9 86.5

4 unchanged sentences

HKA Pre-Acquisition Adjusted EBITDA (7)

Vitner's Pre-Acquisition Adjusted EBITDA (7)

Truco Pre-Acquisition Adjusted EBITDA (7)

Festida Pre-Acquisition Adjusted EBITDA (7)

Garcia Pre-Acquisition Adjusted EBITDA (7)

Further Adjusted EBITDA $ 164.2 $ 192.7 $ 140.7

6 unchanged sentences

The income was the result of the conversion rate of the 2018 LTIP Phantom Units into the 2020 LTIP RSUs.

The Company recorded expenses of $6.5 million and $7.9 million in 2019 and 2018, respectively.

The Company recorded expenses of $6.5 million in 2019.

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.

Additionally, in the Successor period, the Company incurred $6.8 million of share based compensation for the Successor period from August 29, 2020 to January 3, 2021

Additionally, the Company incurred $13.0 million and $10.6 million of share-based compensation for the Successor period from August 29, 2020 to January 3, 2021 and for fiscal 2021, respectively.

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 year ended January 3, 2021, we recorded a benefit of $0.2 million compared to a benefit of $0.9 million and expense of $1.1 million during 2019 and 2018, respectively.

Asset Impairments and Write-Offs — There were no adjustments for impairments recorded in 2020.

However, we did record impairments on certain trade name intangible brand assets in fiscal years 2019 and 2018 totaling $3.8 million and $2.9 million, respectively.

Impairments recorded in fiscal years 2019 and 2018 were for a brand acquired from Inventure and a brand acquired from Golden Flake, respectively.

In 2018, we also wrote-off certain computer hardware and software acquired in recent acquisitions that we retired totaling $0.6 million.

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

In 2020, the majority of charges are related to costs incurred for the Business Combination, the HK Anderson acquisition, and the Truco acquisition, and related integration expenditures where we incurred costs of $40.0 million in 2020 compared to expenses of $3.3 million and $11.3 million for the same periods in 2019 and 2018 respectively.

The fiscal 2018 adjustment included a $4.0 million write-off of certain plant assets to discontinue our manufacturing plant in Denver, Colorado, following a strategic review of manufacturing capacity related to the Inventure integration.

Later, in fiscal 2019, we recorded $4.6 million in proceeds from the sale of the facility, included in the 2019 adjustment.

(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, offset by severance costs associated with the elimination of RSP positions, fall into this category.

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

Asset Impairments and Write-Offs — There were no adjustments for impairments recorded in 2021 or 2020.

However, we did record an impairment on certain trade name intangible brand assets in fiscal year 2019 totaling $3.8 million.

The impairment recorded in fiscal year 2019 was for a brand acquired from Inventure.

(3) Adjustment for Acquisition and Integration Costs – This is primarily comprised of the following:

(i) consulting, transaction services, and legal fees incurred for acquisitions and certain potential acquisitions;

(ii) integration and restructuring costs related to recently completed acquisitions;

and (iii) costs associated with reclaiming distribution rights from distributors.

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 2019, we incurred net expenses of $3.3 million related to acquisition expenses, which was partly offset by a $4.6 million gain from the sale of a manufacturing plant in Denver, CO previously written down as part of the Inventure Foods acquisition.

(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.

In addition, certain pre-Business Combination 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, offset by severance costs associated with the elimination of RSP positions, fall into this category.

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.

The increase in fiscal 2021 costs is primarily a result of increased IO conversions, enhancements in our supply chain capabilities and costs associated with our transition of IT systems, including a new ERP.

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

In fiscal 2020, we incurred $2.5 million of expenses related to a prepayment penalty for the pay-down of debt and $0.2 million of other debt raising and preferred equity capital costs.

In fiscal 2019, these costs include expenses related to the sale of preferred and common units by Series U, Series R, and SRS to an outside investor, the repayment of the Second Lien Term Loan, and the issuance of the Secured First Lien Note to finance the Kennedy Acquisition.

Financing-Related Costs adjustments of $4.7 million, and $0.9 million, were made in fiscal years 2019 and 2018, respectively.

The amount in fiscal 2019 includes $4.3 million related to a loss recognized on extinguishment of debt related to the repayment of the Second Lien Term Loan as well as $0.4 million in professional fees related to the new capital raised, which were partially offset by deferred financing fees.

In 2021, we incurred $0.7 million of expense compared to fiscal 2020, and 2019 expenses of $2.7 million and $4.7 million, respectively.

In 2020 we incurred $2.5 million of expenses related to a prepayment penalty for the pay-down of debt and in 2019, these costs include expenses related to the sale of preferred and common units by Series U, Series R, and SRS to an outside investor, the repayment of the Second Lien Term Loan, and the issuance of the Secured First Lien Note to finance the Kennedy Acquisition.

(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.

(7) Pre-Acquisition Adjusted EBITDA- This adjustment represents the adjusted EBITDA of acquired companies prior to the acquisition date.

Liquidity and Capital Resources

The following table presents net cash provided by operating activities, investing activities and financing activities for the fifty-three weeks ended January 3, 2021 and fifty-two weeks ended December 29, 2019.

The following table presents net cash provided by operating activities, investing activities and financing activities for the year ended January 2, 2022, fiscal periods ended January 3, 2021 and August 28, 2020, and year ended December 29, 2019.

Successor Predecessor

(in thousands) From

(in thousands) For the year ended January 2, 2022 From

August 29, 2020

1 unchanged sentence

December 30, 2019

August 28, 2020 For the year ended December 29, 2019 For the year ended December 30, 2018

Net cash (used in) provided by operating activities $ (932) $ 30,627 $ 27,992 $ 15,747

August 28, 2020 For the year ended December 29, 2019

Net cash provided by (used in) operating activities $ 48,387 $ (932) $ 30,627 $ 27,992

Net cash used in investing activities (136,098) (681,882) (21,516) (115,882)

Net cash provided by (used in) financing activities 82,778 241,973 (10,451) 96,029

For the period ended January 3, 2021, our consolidated cash balance, including cash equivalents, was $46.9 million or $31.8 million higher than at December 29, 2019.

Net cash provided by operating activities for the combined fifty-three weeks ended January 3, 2021 was $29.7 million compared to $28.0 million for the fifty-two weeks ended December 29, 2019, with the difference largely driven by the increase in gross margin and lower interest expense partially offset by the increased cash expenses associated with transaction costs.

Cash used in investing activities for the combined fifty-three weeks ended January 3, 2021 was $703.4 million mostly driven by the Business Combination and capital expenditures of $21.7 million, versus cash used in investing activity of $115.9 million for the fifty-two weeks ended December 29, 2019, which was driven by the acquisitions of Truco and the corresponding ON THE BORDER tradename, along with the acquisition of UBH, Kitchen Cooked and the H.K.

Anderson business.

Additionally, during fiscal year 2019, we sold certain IO notes, which resulted in cash proceeds of $33.2 million.

Net cash provided by financing activities was $231.5 million for the combined fifty-three weeks ended January 3, 2021, which was primarily as a result of the bridge credit agreement for the acquisition of Truco and exercise of warrants, versus net cash provided by financing activities of $96.0 million for the fifty-two weeks ended December 29, 2019.

For the period ended January 2, 2022, our consolidated cash balance, including cash equivalents, was $41.9 million or $4.9 million lower than at January 3, 2021.

Net cash provided by operating activities for the fifty-two weeks ended January 2, 2022 was $48.4 million compared to $29.7 million for the combined fiscal year ended January 3, 2021, with the difference largely driven by the increase in the non-cash expenses of depreciation and amortization, driven largely by the fair value adjustments to Property, Plant and Equipment and Intangibles as part of the Business Combination.

Cash used in investing activities for the fiscal year ended January 2, 2022 was $136.1 million mostly driven by the acquisitions of Vitner's, Festida, and R.W.

Garcia and capital expenditures of $31.7 million, versus cash used in investing activity of $703.4 million for the combined fiscal year ended January 3, 2021, which was largely driven by the Business Combination, acquisition of Truco and IP purchase of the On the Border tradename.

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.

Financing Arrangements

2 unchanged sentences

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 July 23, 2020 the ABL facility was amended to add language around the public structure.

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 January 3, 2021 or December 29, 2019.

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 January 3, 2021 and December 29, 2019, $106.4 million and $83.0 million, respectively, was available for borrowing, net of letters of credit.

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.

As of January 2, 2022 and January 3, 2021, $96.9 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%).

Under the Prime rate, had there been outstanding balances, the interest rate on the facility as of January 3, 2021 and December 29, 2019 would have been 3.75% and 5.25%, respectively.

Had there been outstanding balances and the Company elected to use the LIBOR rate, the interest rate on the ABL facility as of January 3, 2021 and December 29, 2019 would have been 1.64% and 3.30%, respectively.

Had the Company elected to use the Prime rate, the interest rate on the facility as of January 2, 2022 and January 3, 2021 would have been 3.75%.

The Company elected to use the LIBOR rate, the interest rate on the ABL facility as of January 2, 2022 was 1.58%.

Had there been outstanding balances and the Company elected to use the LIBOR rate, the interest rate on the ABL facility as of January 2, 2022 and January 3, 2021 would have been 1.60% and 1.64%, respectively.

The ABL facility is also subject to unused line fees (0.5% at January 2, 2022) and other fees and expenses.

Standby letters of credit in the amount of $14.1 million have been issued as of January 3, 2021 and December 29, 2019.

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.

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

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.

4 unchanged sentences

"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 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 January 3, 2021 and December 29, 2019 was 3.65% and 5.20%, respectively.

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.

1 unchanged sentence

Deferred fees are amortized ratably over the respective lives of each term loan.

Deferred fees associated with the term loans under the January 2017 credit agreement were fully expensed during 2017 and 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.

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".

2 unchanged sentences

The total repayment was $126.3 million, and resulted in a loss on early extinguishment of approximately $4.3 million.

On January 20, 2021, the First Lien Term Loan was refinanced.

"Subsequent Event" for further details.

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.

1 unchanged sentence

The Secured First Lien Note requires quarterly interest payments, with a repayment of principal on the maturity date of November 21, 2024.

The Secured First Lien Note bears interest at an annual rate based on 3 month LIBOR plus an applicable margin of 5.25%.

The interest rate on the Secured First Lien Note on August 28, 2020, prior to payoff was 6.7%.

On August 28, 2020, as part of the Business Combination Agreement with CCH (as described in Note 1.

" Operations and Summary of Significant Accounting Policies" and Note 2.

"Acquisitions"), the Senior Secured First Lien Floating Rate Note was paid off.

The total repayment was $128.8 million, which includes a $2.5 million early termination fee included within other expense (income), net in the Successor period and $1.3 million of interest expense which had been accrued in the Predecessor period.

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 proceeds of the Bridge Credit Agreement were used to fund the Company’s acquisition of Truco and asset purchase of the OTB IP from Truco Seller and OTB Acquisition, LLC., see Note 2.

"Acquisitions" for more details, in which the Company withdrew $490.0 million to finance the acquisition.

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 loan will be converted into an Extended Term Loan if the Loan remains open 365 days after the closing date.

(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.

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.

On January 20, 2021, the bridge loan was repaid in full by the refinancing of term debt.

"Subsequent Event" for further details.

The First Lien Term Loan, the Secured First Lien Note 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 January 3, 2021.

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.

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 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 ("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.

The refinancing was accounted for as an extinguishment.

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

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 $787.2 million remains outstanding as of January 2, 2022.

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 January 2, 2022.

In July 2021, the Company entered into two separate finance lease obligations with Banc of America Leasing & Capital, LLC.

In the first agreement, we agreed to sell and lease-back certain manufacturing equipment and warehouse/distribution equipment for $13.0 million with an interest rate of 3.26%.

In the second agreement, we drew $9.8 million related to certain manufacturing equipment and warehouse/distribution equipment.

Only interest is due on these loans until the capital projects are completed.

In November 2021, we entered into an additional two agreements for $1.5 million with an interest rate of 3.97% and $2.2 million with an interest rate of 3.98%.

Derivative Financial Instruments

To reduce the effect of interest rate fluctuations, the Company entered into an interest rate swap contract on September 6, 2019, with an effective date of September 30, 2019, with a counter party to make a series of payments based on a fixed interest rate of 1.339% and receive a series of payments based on the greater of LIBOR or 0.00%.

To reduce the effect of interest rate fluctuations, the Company entered into a three year interest rate swap contract on September 6, 2019, with an effective date of September 30, 2019, with a counter party to make a series of payments based on a fixed interest rate of 1.339% and receive a series of payments based on the greater of LIBOR or 0.00%.

Both the fixed and floating payment streams are based on a notional amount of $250 million.

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 January 3, 2021, the effective fixed interest rate on the long-term debt hedged by this contract was 4.4%.

On December 21, 2021, with an effective date of December 31, 2021, the Company entered into an accreting interest rate swap contract with a counter party to make a series of payments based on a fixed interest rate of 1.3885% and receive a series of payments based on the greater of LIBOR or 0.00%.

Both the fixed and floating payment streams are based on a notional amount of $250 million, accreting to $500 million and maturing on September 30, 2026.

The Company entered into these 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 January 2, 2022, the effective fixed interest rate on the long-term debt hedged by these contract was 3.5%.

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

1 unchanged sentence

Accumulated Other Comprehensive (Loss) Income.”

IO Loan Purchase Commitments

The Company sold notes receivable on its books to Bank of America during 2019, which the Company partially guarantees.

The outstanding balance of notes purchased by Bank of America at January 3, 2021 and December 29, 2019 was $16.5 million and $25.1 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 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.

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.

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 $6.6 million and $8.6 million at January 3, 2021 and December 29, 2019, respectively, all of which was on balance sheet.

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.

Other Notes Payable and Capital Leases

During the first fiscal quarter of 2020, the Company closed on the acquisition of Kitchen Cooked, as described in Note 2.

"Acquisitions" and the acquisition included a deferred purchase price of $2.0 million.

Additionally, during the first fiscal quarter of 2020, the Company purchased intellectual property that included a deferred purchase price of $0.5 million.

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.

Due to the structure of the transaction, 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 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.

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.

The Company services the loans for the financial institution by collecting principal and interest from the IOs and passing it through to the institution.

The underlying notes have various maturity dates through December 2028.

The underlying notes have various maturity dates through April 2030.

The outstanding balance of notes purchased by Bank of America at January 2, 2022 and January 3, 2021 was $19.7 million and $16.5 million, respectively.

The Company partially guarantees the outstanding loans, as discussed in further detail within “Note 12.

Contingencies”.

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.

Interest expense for the Successor period from August 29, 2020 to January 3, 2021 was $13.3 million, $7.9 million of which was related to the Company’s credit facility and other long-term debt and $4.7 million of which was related to amortization of deferred financing fees, and $0.7 million of which was related to IO loans.

Interest expense for the Predecessor period from December 30, 2019 to August 28, 2020 was $26.7 million, $23.3 million of which was related to the Company’s credit facility and other long-term debt, $1.7 million of which was related to amortization of deferred financing fees, and $1.7 million of which was related to IO loans.

Interest expense for the year ended December 29, 2019 was $48.4 million, $43.7 million of which was related to the Company’s credit facility and other long-term debt, $2.1 million of which was related to amortization of deferred financing fees, and $2.6 million of which was related to IO loans.

Interest expense for the year ended December 30, 2018 was $45.7 million, $42.3 million of which was related to the Company’s credit facility and other long-term debt, $2.4 million of which was related to amortization of deferred financing fees, and $0.7 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).

The Company guarantees loans made to IOs by M&T Bank for the purchase of routes.

The outstanding balance of loans guaranteed was $4.9 million and $6.6 million at January 2, 2022 and January 3, 2021, respectively, all of which was on balance sheet.

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.

Other Notes Payable and Finance 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 was still outstanding as of January 3, 2021 and the remaining balance was repaid in fiscal year 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 January 2, 2022 and January 3, 2021, respectively.

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.

Amounts outstanding under notes payable consisted of the following:

(in thousands) As of

January 2, 2022

As of January 3, 2021

Note payable – IO notes $ 24,822 $ 23,106

Finance lease obligations 8,166 8,967

Other 1,678 1,509

Total notes payable 34,666 33,582

current portion (9,957) (9,018)

Long term portion of notes payable $ 24,709 $ 24,564

Interest expense consisted of the following:

Successor Predecessor

(in thousands) Year Ended January 2, 2022 From

August 29, 2020

January 3, 2021 From

December 30, 2019

August 28, 2020 Year Ended December 29, 2019

Company’s ABL facility and other long-term debt $ 29,270 $ 7,911 $ 23,350 $ 43,688

Amortization of deferred financing fees 3,847 4,721 1,743 2,101

IO loans 1,591 669 1,566 2,599

Total interest $ 34,708 $ 13,301 $ 26,659 $ 48,388

Off-Balance Sheet Arrangements

Purchase Commitments

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

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 $34.7 million as of January 2, 2022.

The Company has recorded purchase commitment gain (losses) totaling $0.9 million and $(0.7) million for the Successor period from August 29, 2020 to January 3, 2021 and for the Predecessor period from December 30, 2019 to August 28, 2020, respectively.

The Company has recorded purchase commitment gain (losses) totaling $0.9 million and $(1.1) million for the years ended December 29, 2019 and December 30, 2018, respectively.

The Company accrues for losses on firm purchase commitments in a loss position at the end of each reporting period to the extent that there is an active observable market.

The Company has recorded purchase commitment gain (losses) totaling $2.8 million for the year ended January 2, 2022, $0.9 million and $(0.7) million for the Successor period from August 29, 2020 to January 3, 2021 and for the Predecessor period from December 30, 2019 to August 28, 2020, respectively, and $0.9 million for the year ended December 29, 2019, 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 $4.1 million and $5.1 million at January 3, 2021 and December 29, 2019, respectively, all of which was recorded by the Company as an off balance sheet arrangement.

The outstanding balance of loans guaranteed was $2.2 million and $4.1 million at January 2, 2022 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.

2 unchanged sentences

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 $7.1 million and $0.7 million at January 3, 2021 and December 29, 2019, 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, which the Company partially guarantees.

The outstanding balance of notes purchased by Bank of America at January 3, 2021 and December 29, 2019 was $16.5 million and $25.1 million, respectively.

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

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 outstanding balance of loans guaranteed that were issued by Bank of America was $18.6 million and $7.1 million at January 2, 2022 and January 3, 2021, respectively, which are off balance sheet.

New Accounting Pronouncements

22 unchanged sentences

The costs of these activities are recognized at the time the related revenue is recorded, which normally precedes the actual cash expenditure.

The recognition of these costs therefore requires management judgment regarding the volume of promotional offers that will be redeemed by either the retail trade or consumer.

The recognition of these costs therefore requires management judgment regarding the volume of promotional offers that will be redeemed by either the retail trade customer or consumer.

These estimates are made using various techniques including historical data on performance of similar promotional programs.

In 2019, we implemented a system that improves our ability to analyze and estimate the reserve for unpaid costs relating to our promotional activities.

Differences between estimated expense and actual redemptions are recognized as a change in management estimate as the actual redemption incurred.

Differences between estimated expense and actual redemptions are recognized as a change in management estimate as the actual redemption is incurred.

Distribution Route Purchase and Sale Transactions

18 unchanged sentences

If an entity believes, as a result of each qualitative assessment, it is more likely than not that goodwill or an indefinite-lived intangible asset is not impaired, a quantitative impairment test is not required.

We have identified the existing snack food operations as our sole reporting unit.

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 o n August 28, 2020.

We have determined that there was no significant impact that affected the fair value of the reporting unit.

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.

We performed a quantitative impairment test on the 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.

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.

3 unchanged sentences

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income and the reversal of deferred tax liabilities during the period in which related temporary differences become deductible.

Under the terms of the TRA as part of the Business Combination Agreement, the Company generally will be required to pay to the Continuing Members 85% of the applicable cash savings, if any, in U.S.

federal and state income tax based on its ownership in UBH that the Company is deemed to realize in certain circumstances as a result of the increases in tax basis and certain tax attributes resulting from the Business Combination.

This is accounted for in conjunction with the methods used to record income tax described above.

We follow the provisions of ASC 740-10 related to the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements.

4 unchanged sentences

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 and administrative expenses.

As of January 3, 2021, and December 29, 2019, no liability for unrecognized tax benefits was required to be reported.

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.

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

8 unchanged sentences

Any excess of the purchase price over the estimated fair values of the identifiable net assets acquired is recorded as goodwill.

Self-Insurance

We are primarily self-insured, up to certain limits, for employee group health claims.

We purchase stop-loss insurance, which will reimburse us for individual and aggregate claims in excess of certain annual established limits.

Operations are charged with the cost of claims reported and an estimate of claims incurred but not reported.

We are primarily self-insured through large deductible insurance plans for automobile, general liability and workers’ compensation.

We have utilized a number of different insurance vehicles and programs for these insurable risks and recognizes expenses and reserves in accordance with the provisions of each insurance vehicle/program.

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-K

Item 7. Management’s Discussion and Analysis