UTZ filing — read by section

Item 8. Financial Statements and Supplementary Data

Item 8. Financial Statements and Supplementary Data 
 
 Index to the Financial Statements Page 
 
 Report of Independent Registered Public Accounting Firm ( Grant Thornton LLP , Philadelphia, PA , PCAOB ID Number 248 ) 
 64 
 
 Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting (Grant Thornton LLP, Philadelphia, PA, PCAOB ID Number 248) 
 66 
 
 Consolidated Balance Sheets as of January 2, 2022 and January 3, 2021 
 67 
 
 Consolidated Statements of Operations And Comprehensive Income (Loss) for the year ended January 2, 2022, fiscal periods ended January 3, 2021 and August 28, 2020, and year ended December 29, 2019 
 68 
 
 Consolidated Statements of Equity for the year ended January 2, 2022, fiscal periods ended January 3, 2021 and August 28, 2020, and year ended December 29, 2019 
 69 
 
 Consolidated Statements of Cash Flows for the year ended January 2, 2022, fiscal periods ended January 3, 2021 and August 28, 2020, and year ended December 29, 2019 
 71 
 
 Notes to Consolidated Financial Statements 
 72 
 
 63 

 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 

 Board of Directors and Shareholders 
 Utz Brands, Inc. 
 Opinion on the financial statements 
 We have audited the accompanying consolidated balance sheets of Utz Brands, Inc. (a Delaware corporation) and subsidiaries (the "Company" or "Successor") as of January 2, 2022 and January 3, 2021, the related consolidated statements of comprehensive income (loss), equity (deficit), and cash flows of the Successor and Utz Brands Holdings, LLC (a Delaware limited liability company) ("Predecessor") for the year ended January 2, 2022 (Successor), the periods from August 29, 2020 to January 3, 2021 (Successor) and December 30, 2019 to August 28, 2020 (Predecessor), and the year ended December 29, 2019 (Predecessor), and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 2, 2022 and January 3, 2021, and the results of its operations and its cash flows for the year ended January 2, 2022 (Successor), the periods from August 29, 2020 to January 3, 2021 (Successor) and December 30, 2019 to August 28, 2020 (Predecessor), and the year ended December 29, 2019 (Predecessor) in conformity with accounting principles generally accepted in the United States of America. 
 We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of January 2, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 3, 2022 expressed include an unqualified opinion. 
 Change in accounting principle 
 As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for leases in 2021 due to the adoption of Accounting Standards Update 2016-02, Leases (Accounting Standards Codification Topic 842). 
 Basis for opinion 
 These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. 
 We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. 
 Critical audit matter 
 The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates. 
 
 64 

 Customer trade promotions 
 
 As described further in note 1 (Revenue Recognition) to the consolidated financial statements, the Company has recorded a provision for customer trade allowances, consisting primarily of pricing allowances and programs associated with sales to customers. The costs of these activities are recognized at the time the related revenue is recorded, which normally precedes the actual cash expenditure. The reserve recorded requires management judgment regarding the volume of promotional offers that will be redeemed by either the retail trade customer or consumer. These estimates are made using various techniques including historical data on performance of similar promotional programs. The Company’s reserve for customer trade allowances as of January 2, 2022 was $26.5 million. 
 The principal consideration for our determination that customer trade promotions is a critical audit matter is due to uncertainty around the amount and timing of settlements, which typically occur in a period subsequent to the related sales transactions. 
 Our audit procedures related to the customer trade promotions included the following, among others. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s trade promotions process at disaggregated levels. This included controls related to the recording of the Company’s current trade spending and calculations of the trade reserves. We analyzed the reserve by trade promotion type to identify unusual trends. We assessed the Company’s historical ability to accurately estimate its customer trade allowances by comparing historical estimates to final settlements. We compared a sample of settlements subsequent to period end to the amount previously recognized by the Company. 
 /s/ GRANT THORNTON LLP 
 We have served as the Company’s auditor since 2011. 
 Philadelphia, Pennsylvania 
 March 3, 2022 
 
 65 

 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 

 Board of Directors and Shareholders 
 Utz Brands, Inc. 
 Opinion on internal control over financial reporting 
 We have audited the internal control over financial reporting of Utz Brands, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of January 2, 2022, based on criteria established in the 2013 Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 2, 2022, based on criteria established in the 2013 Internal Control — Integrated Framework issued by COSO. 
 We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended January 2, 2022, and our report dated March 3, 2022 expressed an unqualified opinion on those financial statements. 
 Basis for opinion 
 The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. 
 We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. 
 Definition and limitations of internal control over financial reporting 
 A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. 
 Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 
 /s/ GRANT THORNTON LLP 
 Philadelphia, Pennsylvania 
 March 3, 2022 
 
 66 

 Utz Brands, Inc. 
 CONSOLIDATED BALANCE SHEETS 
 January 2, 2022 and January 3, 2021 
 (In thousands, except share information) 
 
 As of
January 2, 2022 As of
January 3, 2021 
 ASSETS 
 Current Assets 
 Cash and cash equivalents $ 41,898 $ 46,831 
 Accounts receivable, less allowance of $ 1,391 and $ 239 , respectively 
 131,388 118,305 
 Inventories 79,517 59,810 
 Prepaid expenses and other assets 18,395 11,573 
 Current portion of notes receivable 6,706 7,666 
 Total current assets 277,904 244,185 
 Non-current Assets 
 Property, plant and equipment, net 303,807 270,416 
 Goodwill 915,438 862,183 
 Intangible assets, net 1,142,509 1,171,709 
 Non-current portion of notes receivable 20,725 20,000 
 Other assets 55,963 15,671 
 Total non-current assets 2,438,442 2,339,979 
 Total assets $ 2,716,346 $ 2,584,164 
 LIABILITIES AND EQUITY 
 Current Liabilities 
 Current portion of term debt $ 11,414 $ 469 
 Current portion of other notes payable 9,957 9,018 
 Accounts payable 95,369 57,254 
 Accrued expenses and other 71,280 80,788 
 Current portion of warrant liability — 52,580 
 Total current liabilities 188,020 200,109 
 Non-current portion of term debt 830,548 778,000 
 Non-current portion of other notes payable 24,709 24,564 
 Non-current accrued expenses and other 55,838 37,771 
 Non-current warrant liability 46,224 85,032 
 Deferred tax liability 136,334 73,786 
 Total non-current liabilities 1,093,653 999,153 
 Total liabilities 1,281,673 1,199,262 
 Commitments and contingencies 
 Equity 
 
 Shares of Class A Common Stock, $ 0.0001 par value; 1,000,000,000 shares authorized; 77,644,645 and 71,094,714 shares issued and outstanding as of January 2, 2022 and January 3, 2021, respectively. 
 8 7 
 Shares of Class V Common Stock, $ 0.0001 par value; 61,249,000 shares authorized; 59,349,000 and 60,349,000 shares issued and outstanding as of January 2, 2022 and January 3, 2021, respectively. 
 6 6 
 Additional paid-in capital 912,574 793,461 
 Accumulated deficit ( 236,598 ) ( 241,490 ) 
 Accumulated other comprehensive income 3,715 924 
 Total stockholders' equity 679,705 552,908 
 Noncontrolling interest 754,968 831,994 
 Total equity 1,434,673 1,384,902 
 Total liabilities and equity $ 2,716,346 $ 2,584,164 

 The accompanying notes are an integral part of these consolidated financial statements. 
 67 

 Utz Brands, Inc. 
 CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) 
 For the year ended January 2, 2022, fiscal periods ended January 3, 2021 and August 28, 2020, and year ended December 29, 2019 
 (In thousands, except share information) 
 
 Successor Predecessor 
 For the year ended January 2, 2022 From 
August 29, 2020
through 
January 3, 2021 From 
December 30, 2019
through 
August 28, 2020 For the year ended December 29, 2019 
 Net sales $ 1,180,713 $ 325,648 $ 638,662 $ 768,228 
 Cost of goods sold 796,804 219,977 411,595 514,430 
 Gross profit 383,909 105,671 227,067 253,798 
 Selling, general and administrative expenses 
 Selling 249,352 63,616 131,579 163,589 
 General and administrative 125,855 43,871 64,050 64,723 
 Total selling, general and administrative expenses 375,207 107,487 195,629 228,312 
 Gain on sale of assets 
 Gain on disposal of property, plant and equipment, net 1,133 109 79 6,028 
 Gain on sale of routes, net 731 749 1,264 7,232 
 Total gain on sale of assets 1,864 858 1,343 13,260 
 Income (loss) from operations 10,566 ( 958 ) 32,781 38,746 
 Other income (expense) 
 Interest expense ( 34,708 ) ( 13,301 ) ( 26,659 ) ( 48,388 ) 
 Other income (expense) 3,551 ( 2,058 ) 1,271 ( 576 ) 
 Gain (loss) on remeasurement of warrant liability 36,675 ( 91,851 ) — — 
 Other income (expense), net 5,518 ( 107,210 ) ( 25,388 ) ( 48,964 ) 
 Income (loss) before income taxes 16,084 ( 108,168 ) 7,393 ( 10,218 ) 
 Income tax expense (benefit) 8,086 ( 267 ) 3,973 3,146 
 Net income (loss) 7,998 ( 107,901 ) 3,420 ( 13,364 ) 
 Net loss (income) attributable to noncontrolling interest 12,557 7,971 — ( 2,808 ) 
 Net income (loss) attributable to controlling interest $ 20,555 $ ( 99,930 ) $ 3,420 $ ( 16,172 ) 
 Earnings per share of Class A Common Stock: 
 (in dollars) 
 
 Basic $ 0.26 $ ( 1.64 ) 
 Diluted $ 0.25 $ ( 1.64 ) 
 Weighted-average shares of Class A Common Stock outstanding 
 Basic 76,677,981 61,085,943 
 Diluted 81,090,229 61,085,943 
 Other comprehensive gain (loss): 
 Change in fair value of interest rate swap $ 2,791 $ 924 $ ( 7,463 ) $ 1,408 
 Comprehensive income (loss) $ 23,346 $ ( 99,006 ) $ ( 4,043 ) $ ( 14,764 ) 

 The accompanying notes are an integral part of these consolidated financial statements. 
 68 

 Utz Brands, Inc. 
 CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT) 
 For the year ended January 2, 2022, fiscal periods ended January 3, 2021 and August 28, 2020, and year ended December 29, 2019 
 (In thousands, except share information) 
 
 Predecessor Members' 
(Deficit) Equity Accumulated Other Comprehensive (Loss) Income Noncontrolling Interest Total (Deficit) Equity 
 
 Balance at December 30, 2018 $ ( 119,971 ) $ — $ ( 11,345 ) $ ( 131,316 ) 
 Net (loss) income ( 16,172 ) — 2,808 ( 13,364 ) 
 Other comprehensive income — 1,408 — 1,408 
 Contributions from members and noncontrolling interest 120,158 — 3,750 123,908 
 Distributions to members and noncontrolling interest ( 11,461 ) — ( 2,527 ) ( 13,988 ) 
 Balance at December 29, 2019 ( 27,446 ) 1,408 ( 7,314 ) ( 33,352 ) 
 Net income 3,420 — — 3,420 
 Other comprehensive loss — ( 7,463 ) — ( 7,463 ) 
 Merger of noncontrolling interest ( 7,314 ) — 7,314 — 
 Distributions to members ( 6,415 ) — — ( 6,415 ) 
 Balance at August 28, 2020 $ ( 37,755 ) $ ( 6,055 ) $ — $ ( 43,810 ) 

 69 

 Class A Common Stock Class V Common Stock Additional Paid-in Capital Accumulated (Deficit) Accumulated Other Comprehensive Income Total Stockholders' Equity Non-controlling Interest Total Equity 
 Successor Shares Amount Shares Amount 
 Balance at August 29, 2020 57,369,050 $ 6 57,765,978 $ 6 $ 472,329 $ ( 134,331 ) $ — $ 338,010 $ 950,768 $ 1,288,778 
 Conversion of Restricted Sponsor Shares 2,000,000 — — — — — — — — 
 Conversion of Continuing Members' Retained Restricted Units — 3,483,022 — — — — — — — 
 Conversion of warrants 10,825,664 1 — 299,867 — — 299,868 ( 88,255 ) 211,613 
 Share-based compensation — — 6,790 — — 6,790 — 6,790 
 Exchange 900,000 — ( 900,000 ) — 13,724 — — 13,724 ( 13,724 ) — 
 Tax impact arising from exchanges and conversion of warrants, net of valuation allowance of $ 45,993 
 — — 751 — — 751 741 1,492 
 Net loss — — — ( 99,930 ) — ( 99,930 ) ( 7,971 ) ( 107,901 ) 
 Other comprehensive income — — — — 924 924 — 924 
 Dividends declared ($ 0.11 per share of Class A Common Stock) 
 — — — ( 7,229 ) — ( 7,229 ) — ( 7,229 ) 
 Distribution to noncontrolling interest — — — — — — ( 9,565 ) ( 9,565 ) 
 Balance at January 3, 2021 71,094,714 7 60,349,000 6 793,461 ( 241,490 ) 924 552,908 831,994 1,384,902 
 Conversion of warrants 4,976,717 — — 144,659 — — 144,659 ( 32,714 ) 111,945 
 Tax impact arising from exchanges and exercises of warrants — — ( 51,455 ) — — ( 51,455 ) — ( 51,455 ) 
 Share-based compensation 573,214 1 — 12,960 — — 12,961 — 12,961 
 Exchange 1,000,000 — ( 1,000,000 ) — 12,949 — — 12,949 ( 12,949 ) — 
 Net income — — — 20,555 — 20,555 ( 12,557 ) 7,998 
 Other comprehensive income — — — — 2,791 2,791 — 2,791 
 Dividends declared ($ 0.204 per share of Class A Common Stock) 
 — — — ( 15,663 ) — ( 15,663 ) — ( 15,663 ) 
 Distribution to noncontrolling interest — — — — — — ( 18,806 ) ( 18,806 ) 
 Balance at January 2, 2022 77,644,645 77,645 $ 8 59,349,000 $ 6 $ 912,574 $ ( 236,598 ) $ 3,715 $ 679,705 $ 754,968 $ 1,434,673 

 The accompanying notes are an integral part of these consolidated financial statements. 
 70 

 Utz Brands, Inc. 
 CONSOLIDATED STATEMENTS OF CASH FLOWS 
 For the year ended January 2, 2022, fiscal periods ended January 3, 2021 and August 28, 2020, and year ended December 29, 2019 
 (In thousands) 
 Successor Predecessor 
 For the year ended January 2, 2022 From 
August 29, 2020 
through 
January 3, 2021 From 
December 30, 2019 
through 
August 28, 2020 For the year ended December 29, 2019 
 Cash flows from operating activities 
 Net income (loss) $ 7,998 $ ( 107,901 ) $ 3,420 $ ( 13,364 ) 
 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: 
 Impairment and other charges — — — 3,880 
 Depreciation and amortization 80,725 20,688 24,055 29,290 
 Amortization of step-up of inventory — 5,795 — — 
 (Gain) loss on remeasurement of warrant liability ( 36,675 ) 91,851 — — 
 Gain on disposal of property and equipment ( 1,133 ) ( 109 ) ( 79 ) ( 6,028 ) 
 Gain on sale of routes ( 731 ) ( 749 ) ( 1,264 ) ( 7,232 ) 
 Stock based compensation 12,961 6,790 — — 
 Loss on debt extinguishment — 2,500 — 4,336 
 Deferred income taxes 4,828 ( 958 ) 3,583 1,949 
 Amortization of deferred financing costs 3,919 ( 2,639 ) 1,742 955 
 Changes in assets and liabilities: 
 Accounts receivable, net ( 4,528 ) 16,611 ( 11,786 ) 11,542 
 Inventories, net ( 10,595 ) 887 ( 6,883 ) 3,476 
 Prepaid expenses and other assets ( 2,931 ) ( 7,064 ) ( 3,456 ) ( 1,993 ) 
 Accounts payable and accrued expenses and other ( 5,451 ) ( 26,634 ) 21,295 1,181 
 Net cash provided by (used in) operating activities 48,387 ( 932 ) 30,627 27,992 
 Cash flows from investing activities 
 Acquisition of Utz Brands Holdings, LLC, net of cash acquired — ( 185,448 ) — — 
 Acquisitions, net of cash acquired ( 117,585 ) ( 406,485 ) ( 8,816 ) ( 137,845 ) 
 Purchases of property and equipment ( 31,739 ) ( 9,892 ) ( 11,828 ) ( 19,996 ) 
 Purchases of intangibles ( 1,757 ) ( 79,013 ) ( 650 ) — 
 Proceeds from sale of property and equipment 3,033 1,344 615 12,059 
 Proceeds from sale of routes 14,186 2,082 2,774 3,008 
 Proceeds from the sale of IO notes 11,762 — — 33,204 
 Notes receivable, net ( 13,998 ) ( 4,470 ) ( 3,611 ) ( 6,312 ) 
 Net cash used in investing activities ( 136,098 ) ( 681,882 ) ( 21,516 ) ( 115,882 ) 
 Cash flows from financing activities 
 Borrowings on term debt and notes payable 861,139 370,000 2,650 121,250 
 Repayments on term debt and notes payable ( 795,488 ) ( 239,989 ) ( 6,686 ) ( 135,141 ) 
 Payment of debt issuance cost ( 9,210 ) — — — 
 Contribution from member and noncontrolling interest — — — 123,908 
 Exercised warrants 57,232 124,495 — — 
 Dividends paid ( 11,908 ) ( 2,968 ) — — 
 Distributions to members — — ( 6,415 ) ( 11,461 ) 
 Distribution to noncontrolling interest ( 18,987 ) ( 9,565 ) — ( 2,527 ) 
 Net cash provided by (used in) financing activities 82,778 241,973 ( 10,451 ) 96,029 
 Net (decrease) increase in cash and cash equivalents ( 4,933 ) ( 440,841 ) ( 1,340 ) 8,139 
 Cash and cash equivalents at beginning of period 46,831 487,672 15,053 6,914 
 Cash and cash equivalents at end of period $ 41,898 $ 46,831 $ 13,713 $ 15,053 

 The accompanying notes are an integral part of these consolidated financial statements. 
 71 

 Utz Brands, Inc. 
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 
 1. OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 
 Basis of Presentation – The accompanying consolidated financial statements comprise the financial statements of Utz Brands, Inc. ("UBI", the "Company", or "Successor", formerly Collier Creek Holdings ("CCH")) and its wholly owned subsidiaries. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for financial statements and pursuant to the accounting and disclosure rules and regulations of the U.S. Securities and Exchange Commission (the "SEC"). 
 CCH was incorporated in the Cayman Islands on April 30, 2018 as a blank check company. CCH was incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses that the Company had not then identified. CCH’s sponsor was Collier Creek Partners LLC, a Delaware limited liability company (the "Sponsor"). 
 
 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 Utz Brands Holdings, LLC ("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”) (the Domestication and the transactions contemplated by the Business Combination Agreement, collectively, the “Business Combination”), following the approval at the extraordinary general meeting of the shareholders of CCH held on August 27, 2020. The Noncontrolling interest represents the common limited liability company units of UBH held by the Continuing Members. 
 
 The financial statements include the accounts of the Predecessor, prior to the Business Combination, which was determined to be consolidated UBH, which includes the accounts of its wholly-owned subsidiary, Utz Quality Foods, LLC (“UQF”). UQF is consolidated with its wholly-owned subsidiaries: UTZTRAN, LLC; Heron Holding Corporation (“Heron”), with its wholly-owned subsidiaries Golden Flake Snack Foods, Inc. (“Golden Flake”), Inventure Foods, Inc. and its subsidiaries (“Inventure Foods”), and Kitchen Cooked Inc. (“Kitchen Cooked”); Kennedy Endeavors, LLC (“Kennedy”); and GH Pop Holdings, LLC, with its wholly-owned subsidiaries Good Health Natural Products, LLC (“Good Health”), Condor Snack Foods, LLC, and Snikiddy, LLC (“Snikiddy”). 
 
 SRS Leasing LLC and its subsidiaries (“SRS”) were companies formed to acquire, hold and lease real estate to UQF. In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, Consolidation, UQF was determined to be the primary beneficiary of SRS, an entity under common ownership. The accounts of SRS have been consolidated with those of UQF as of and for the fiscal year ended December 29, 2019. On December 30, 2019, the first day of the fiscal year of 2020, SRS was merged into UQF, with UQF surviving the transaction. The accumulated (deficit) equity of SRS was presented on the noncontrolling interest line of the consolidated balance sheet as of December 29, 2019 and was reclassified to members’ (deficit) equity on December 30, 2019, the date of the merger. 
 Rice Investments, L.P. (“RILP”) was formed as a limited partnership pursuant to the Delaware Revised Uniform Limited Partnership Act on January 30, 2004 for the purpose of acquiring, owning, managing, and selling or otherwise disposing of intellectual property (namely trade names) that are used by UQF. RILP had one general partner, UQF, and one limited partner, UM-R Intermediate, LLC (“Intermediate R”). UQF, in accordance with ASC 810, was determined to be the primary beneficiary of RILP, an entity under common ownership. The accounts of RILP have been consolidated with those of UQF as of and for the fiscal year ended December 29, 2019. On December 30, 2019 Intermediate R was merged into Intermediate U with Intermediate U surviving the transaction. Finally, and immediately following that merger, RILP merged into UQF, with UQF being the surviving entity and Intermediate U remaining the sole member of UQF. Prior to these mergers the statements of SRS, RILP, and Intermediate R were combined within the financial statements of Intermediate U. 
 On March 18, 2020, Intermediate U changed its name to Utz Brands Holdings, LLC upon filing a Certificate of Amendment with the Secretary of State of the State of Delaware. 
 72 

 All intercompany transactions and balances have been eliminated in combination/consolidation. 
 
 Operating Entities Holding Entities 
 Utz Quality Foods, LLC Utz Brands, Inc. 
 UTZTRAN, LLC Utz Brands Holdings, LLC 
 Golden Flake Snack Foods, Inc. GH Pop Holdings, LLC 
 Inventure Foods, Inc. and its subsidiaries Heron Holding Corporation 
 Kennedy Endeavors, LLC Truco Holdco, Inc. 
 Good Health Natural Products, LLC R.W. Garcia Holdings, LLC 
 Condor Snack Foods, LLC 
 Snikiddy, LLC 
 Kitchen Cooked, Inc. 
 Truco Enterprises, LP 
 R.W. Garcia CO., Inc. 

 Loss of Emerging Growth Company Status – As of January 2, 2022, we no longer identify as an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the "Securities Act"), as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and we previously took advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended (the "Sarbanes-Oxley Act"), reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. 
 Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company had elected not to opt out of such extended transition period which means that when a standard was issued or revised and it has different application dates for public or private companies, the Company, when it was as an emerging growth company, could adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is either not an emerging growth company or is an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used. 
 Due to the loss of our Emerging Growth Company status, as discussed above, we adopted Topic 842 effective of the first day of fiscal year 2021 within this Form 10-K. This guidance was not adopted within our Form 10-Q's during the fiscal year 2021, therefore the results related to Topic 842 are not comparable with those periods. 
 Operations – The Company through its wholly owned subsidiary UQF, is a premier producer, marketer and distributor of snack food products since 1921. The Company has steadily expanded its distribution channels to where it now sells products to supermarkets, mass merchants, club stores, dollar and discount stores, convenience stores, independent grocery stores, drug stores, food service, vending, military, and other channels in most regions of the United States through routes to market that include direct-store-delivery, direct to warehouse, and third-party distributors. The Company manufactures and distributes a full line of high-quality salty snack items, such as potato chips, tortilla chips, pretzels, cheese balls, pork skins, party mixes, and popcorn. The Company also sells dips, crackers, dried meat products and other snack food items packaged by other manufacturers. 
 Segment Reporting – The Company operates in one reportable segment: the manufacturing, distribution, marketing and sale of snack food products. The Company defines reporting segments as components of an organization for which discrete financial information is available and operating results are evaluated on a regular basis by the chief operating decision maker (“CODM”) in order to assess performance and allocate resources. The CODM is the Chief Executive Officer of the Company. Characteristics of the organization which were relied upon in making the determination that the Company operates in one reportable segment include the similar nature of all of the products that the Company sells, the functional alignment of the Company’s organizational structure, and the reports that are regularly reviewed by the CODM for the purpose of assessing performance and allocating resources. 
 73 

 Cash and Cash Equivalents – The Company considers all highly-liquid investments purchased with an original maturity of three months or less to be cash equivalents. The majority of the Company’s cash is held in financial institutions with insurance provided by the Federal Deposit Insurance Corporation (“FDIC”) of $250,000 per depositor. At various times, account balances may exceed federally insured limits. 
 Accounts Receivables – Accounts receivable are reported at net realizable value. The net realizable value is based on management’s estimate of the amount of receivables that will be collected based on analysis of historical data and trends, as well as review of significant customer accounts. Accounts receivable are considered to be past due when payments are not received within the customer’s credit terms. Accounts are written off when management determines the account is uncollectible. Finance charges are not usually assessed on past-due accounts. 
 Inventories – Inventories are stated at the lower of cost (first-in, first-out) or net realizable value. Inventory write-downs are recorded for shrinkage, damaged, stale and slow-moving items. 
 
 Property, Plant and Equipment – Property, plant and equipment are stated at cost net of accumulated depreciation. Major additions and betterments are recorded to the asset accounts, while maintenance and repairs, which do not improve or extend the lives of the assets, are charged to expense accounts as incurred. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in operations in the disposal period. Depreciation is determined utilizing the straight-line method over the estimated useful lives of the various assets, which generally range from 2 to 20 years for machinery and equipment, 3 to 10 years for transportation equipment and 8 to 40 years for buildings. Assets held for sale are reported at the lower of the carrying amount or fair value less costs to sell. The Company assesses for impairment on property, plant and equipment upon the occurrence of a triggering event. 
 
 Income Taxes – The Company accounts for income taxes pursuant to the asset and liability method of ASC 740, Income Taxes, which requires it to recognize current tax liabilities or receivables for the amount of taxes it estimates 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. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period enacted. A valuation allowance is provided when it is more likely than not that a portion or all of a deferred tax asset will not be realized. 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. 
 The Company follows the provisions of ASC 740-10 related to the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. ASC 740-10 prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. 
 The benefit of tax positions taken or expected to be taken in the Company’s income tax returns is recognized in the financial statements if such positions are more likely than not of being sustained upon examination by taxing authorities. Differences between tax positions taken or expected to be taken in a tax return and the benefit recognized and measured pursuant to the interpretation are referred to as “unrecognized benefits”. A liability is recognized (or amount of net operating loss carryover or amount of tax refundable is reduced) for an unrecognized tax benefit because it represents an enterprise’s potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provisions of ASC 740-10. Interest costs and related penalties related to unrecognized tax benefits are required to be calculated, if applicable. The Company’s 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. The Company does not expect any significant changes in its unrecognized tax benefits in the next fiscal year. 
 Distribution Route Acquisition and Sale Transactions – The Company acquires and sells distribution routes as a part of the Company’s maintenance of its direct-store delivery (“DSD”) network. As new independent operators (“IOs”) are identified, the Company either sells its newly-created or existing Company-managed routes to IOs or sells routes that were previously acquired by the Company to IOs. Gain/loss from the sale of a distribution route is recorded upon the completion of the sale transaction, and is calculated based on the difference between the sale price of the distribution route and the asset carrying value of the distribution route as of the date of sale. The Company records intangible assets for distribution routes that it purchases based on the payment that the Company makes to acquire the route, and records the purchased distribution routes as indefinite-lived intangible assets under FASB ASC 350, Intangibles – Goodwill and Other. The indefinite lived intangible assets are subject to annual impairment testing. 
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 Goodwill and Other Identifiable Intangible Assets – The Company allocates the cost of acquired companies to the identifiable tangible and intangible assets acquired and liabilities assumed, with the remaining amount classified as goodwill. The identification and valuation of these intangible assets and the determination of the estimated useful lives at the time of acquisition, as well as the completion of impairment tests, require significant management judgments and estimates. These estimates are made based on, among other factors, review of projected future operating results and business plans, economic projections, anticipated highest and best use of future cash flows and the cost of capital. The use of alternative estimates and assumptions could increase or decrease the estimated fair value of goodwill and other intangible assets, and potentially result in a different impact to the Company’s results of operations. Further, changes in business strategy and/or market conditions may significantly impact these judgments and thereby impact the fair value of these assets, which could result in an impairment of the goodwill or intangible assets. 
 Finite-lived intangible assets consist of distribution/customer relationships, technology, certain master distribution rights and certain trademarks. These assets are being amortized over their estimated useful lives. Finite-lived intangible assets are tested for impairment only when management has determined that potential impairment indicators are present. 
 Goodwill and other indefinite-lived intangible assets (including certain trade names, certain master distribution rights and company-owned sales routes) are not amortized but are tested for impairment at least annually and whenever events or circumstances change that indicate impairment may have occurred. The Company tests goodwill for impairment at the reporting unit level. The Company has identified the existing snack food operations as its sole reporting unit. 
 As the Company has early adopted the FASB Accounting Standards Update (“ASU”) No. 2017-04, Intangibles - Goodwill and Other (“Topic 350”): Simplifying the Test for Goodwill Impairment, the Company is required to record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. 
 ASU No. 2017-04, Topic 350, also permits an entity to first assess qualitative factors to determine whether it is necessary to perform quantitative impairment tests for goodwill and indefinite-lived intangibles. If an entity believes, as a result of each qualitative assessment, it is more likely than not that the fair value of goodwill or an indefinite-lived intangible asset exceeds its carrying value then a quantitative impairment test is not required. 
 For the qualitative analysis performed, which took place on the first day of the fourth quarter, we have taken into consideration all the events and circumstances listed in FASB ASC 350, Intangibles—Goodwill and Other, in addition to other entity-specific factors that have taken place from the period of the business combination, which assessed goodwill, on August 28, 2020. 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. 
 
 Share-Based Compensation – Share-based compensation is rewarded to employees and directors of the Company and accounted for in accordance with ASC 718, Compensation—Stock Compensation (“ASC 718”). Share-based compensation expense is recognized for equity awards over the vesting period based on their grant-date fair value. During the Successor period, the Company uses various forms of long-term incentives including, but not limited to, Stock Options, Restricted Stock Units (“RSUs”) and Performance Share Units (“PSUs”), provided that the exercise and issuance of such stock options was contingent upon the Company filing a Registration Statement on Form S-8 ("Form S-8") with the SEC, which occurred on November 2, 2020. The fair value of stock options is estimated at the date of grant using the Black-Scholes valuation model. The exercise price of each stock option equals or exceeds the estimated fair value of the Company’s stock price on the date of grant. Stock options can generally be exercised over a maximum term of ten years. The grant date fair value of the PSUs is determined using the Monte Carlo simulation model. The grant date fair value of the RSUs is determined using the Company’s share price on the grant date. Share-based compensation expense is included within the same financial statement caption where the recipient’s other compensation is reported. The Company accounts for forfeitures as they occur. 
 Fair Value of Financial Instruments – Financial instruments held by the Company include cash and cash equivalents, accounts receivable, hedging instruments, purchase commitments on commodities, accounts payable and debt. The carrying value of all cash and cash equivalents, accounts receivable and accounts payable approximate their fair value due to their short-term nature. The carrying value of the debt is also estimated to approximate its fair value based upon current market conditions and interest rates. The fair value of the hedging instruments are revalued at each reporting period. 
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 Self-Insurance – The Company is primarily self-insured, up to certain limits, for employee group health claims. The Company purchases stop-loss insurance, which will reimburse the Company 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. Total health care expense under the program was $ 18.0 million for the year ended January 2, 2022, $ 6.5 million and $ 9.9 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 was $ 16.6 million for the year ended December 29, 2019. The reserve for unpaid claims, which includes an estimate of claims incurred but not reported, was $ 1.9 million and $ 1.5 million at January 2, 2022 and January 3, 2021, respectively. 
 
 The Company is primarily self-insured through large deductible insurance plans for automobile, general liability and workers’ compensation. The Company has 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. The expense associated with automobile, general liability and workers’ compensation insurance programs totaled $ 8.7 million for the year ended January 2, 2022, $ 1.5 million and $ 6.5 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 was $ 9.0 million for the year ended December 29, 2019. The Company also records reserves for unpaid claims and an estimate for claims incurred but not yet reported, including an estimate for the development of any such claim. As of January 2, 2022 and January 3, 2021, the Company had reserves totaling $ 5.9 million and $ 5.0 million, respectively, for these insurance programs. 
 
 Shipping and Handling – The Company records shipping and handling expenses within selling expenses. Shipping and handling expenses for products shipped to customers totaled $ 57.0 million for the year ended January 2, 2022, $ 12.6 million and $ 22.0 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 was $ 27.7 million for the year ended December 29, 2019. 
 
 Advertising Costs – Advertising costs are charged to operations when incurred. The Company had no significant direct response advertising. Advertising expenses totaled $ 11.8 million for the year ended January 2, 2022, $ 6.0 million and $ 5.1 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 was $ 8.0 million for the year ended December 29, 2019. 
 
 Employee Benefits – The Company maintains several contributory 401(k) retirement plans (the “Plans”) for its employees. Profit sharing contributions are made at the discretion of the Board of Directors and expenses recognized related to the profit sharing contribution was $ 3.9 million for the year ended January 2, 2022, $ 1.8 million and $ 3.5 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 was $ 4.9 million for the year ended December 29, 2019. The Plans provide employees with matching contributions primarily at 20 % of their contributions as defined in the Plans. The expense related to the matching contributions was $ 1.9 million for the year ended January 2, 2022, $ 0.6 million and $ 1.1 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 totaled $ 1.4 million for the year ended December 29, 2019. 
 
 Revenue Recognition – The Company’s revenues primarily consist of the sale of salty snack items to customers, including supermarkets, mass merchants, club stores, dollar and discount stores, convenience stores, independent grocery stores, drug stores, food service, vending, military, and other channels. The Company sells its products in most regions of the United States primarily through its DSD network, direct to warehouse shipments, and third-party distributors. These revenue contracts generally have a single performance obligation. Revenue, which includes shipping and handling charges billed to the customer, is reported net of variable consideration and consideration payable to customers, including applicable discounts, returns, allowances, trade promotion, consumer coupon redemption, unsaleable product, and other costs. Amounts billed and due from customers are classified as accounts receivables and require payment on a short-term basis and, therefore, the Company does not have any significant financing components. 
 
 The Company recognizes revenue when (or as) performance obligations are satisfied by transferring control of the goods to customers. Control is transferred upon delivery of the goods to the customer. Shipping and/or handling costs that occur before the customer obtains control of the goods are deemed to be fulfillment activities and are accounted for as fulfillment costs. Applicable shipping and handling are included in customer billing and are recorded as revenue as the products’ control is transferred to customers. The Company assesses the goods promised in customer purchase orders and identifies a performance obligation for each promise to transfer a good that is distinct. 
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 The Company offers various forms of trade promotions and the methodologies for determining these provisions are dependent on local customer pricing and promotional practices, which range from contractually fixed percentage price reductions to provisions based on actual occurrence or performance. The Company’s promotional activities are conducted either through the retail trade or directly with consumers and include activities such as in store displays and events, feature price discounts, consumer coupons, and loyalty programs. The costs of these activities are recognized at the time the related revenue is recorded, which normally precedes the actual cash expenditure. The recognition of these costs therefore requires management judgment regarding the volume of promotional offers that will be redeemed by either the retail trade customer or consumer. These estimates are made using various techniques including historical data on performance of similar promotional programs. The Company has reserves in place of $ 26.5 million as of January 2, 2022 and $ 17.6 million as of January 3, 2021. Differences between estimated expense and actual redemptions are recognized as a change in management estimate as actual redemptions are incurred. 
 Business Combinations – The Company evaluates acquisitions of assets and other similar transactions to assess whether or not the transaction should be accounted for as a business combination or asset acquisition by first applying a screen test to determine if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If the screen is met, the transaction is accounted for as an asset acquisition. If the screen is not met, further determination is required as to whether or not the Company has acquired inputs and processes that have the ability to create outputs which would meet the definition of a business. Significant judgment is required in the application of the screen test to determine whether an acquisition is a business combination or an acquisition of assets. 
 The Company uses the acquisition method of accounting for acquired businesses. Under the acquisition method, the Company’s financial statements reflect the operations of an acquired business starting from the completion of the acquisition. The assets acquired and liabilities assumed are recorded at their respective estimated fair values at the date of the acquisition. Any excess of the purchase price over the estimated fair values of the identifiable net assets acquired is recorded as goodwill. 
 Use of Estimates – Management uses estimates and assumptions in preparing the consolidated financial statements in accordance with U.S. GAAP. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Some examples, but not a comprehensive list, include sales and promotional allowances, customer returns, allowances for doubtful accounts, inventory valuations, useful lives of fixed assets and related impairment, long-term investments, hedge transactions, goodwill and intangible asset valuations and impairments, incentive compensation, income taxes, self-insurance, contingencies, litigation, and inputs used to calculate deferred tax liabilities, tax valuation allowances, and tax receivable agreements. Actual results could vary materially from the estimates that were used. 
 Recently Issued Accounting Standards – In December 2019, the FASB issued "ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes" ("Topic 740"). This ASU is intended to simplify various aspects related to accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarifying certain aspects of the current guidance to promote consistency among reporting entities. For public business entities, ASU 2019-12 was effective for annual periods beginning after December 15, 2020 and interim periods within those annual periods, with early adoption permitted. We adopted this standard upon the loss of our emerging growth status as of January 2, 2022. Adoption of the new standard did not have a material impact on our consolidated financial statements. 
 In February 2016, the FASB issued ASU No. 2016-02, Leases (“Topic 842”), which requires a lessee to recognize in its balance sheet an asset and liability for most leases with a term greater than 12 months. Lessees should recognize a liability to make lease payments and a right-of-use ("ROU") asset representing the lessee’s right to use the underlying asset for the lease term. We adopted the new guidance effective January 4, 2021 using the modified retrospective approach. The primary impact of adopting this standard was the recognition of $ 28.6 million of operating ROU liabilities and $ 29.0 million of operating ROU assets. The adoption did not have a material impact on how we account for finance leases. See Note 16. "Leases" for more information regarding our leasing arrangements. 
 In June 2016, ASU No. 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments (“Topic 326”) was issued. This ASU requires entities to measure the impairment of certain financial instruments, including accounts receivables, based on expected losses rather than incurred losses. For non-public business entities or emerging growth companies, this ASU is effective for fiscal years beginning after December 15, 2022, with early adoption permitted, and will be effective for the Company beginning in 2023. The Company is currently evaluating the impact of the new standard on the Company’s consolidated financial statements and related disclosures. 
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 In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (“Topic 848”): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance for a limited period of time to ease the potential burden in accounting for reference rate reform on financial reporting. The amendments in this ASU are effective for all entities as of March 12, 2020 through December 31, 2022. The amendments of this ASU should be applied on a prospective basis. The Company is currently evaluating the effects adoption of this guidance will have on the consolidated financial statements. 
 In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (“Subtopic 350-40”): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). For non-public business entities or emerging growth companies, this ASU is effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021, with early adoption permitted. The Company adopted Subtopic 350-40 on the first day of fiscal 2020, and the adoption of this standard did not have a material impact on the consolidated financial statements. 
 
 2. ACQUISITIONS 
 Utz Brands Holdings, LLC 
 
 On June 5, 2020, UBH entered into a definitive Business Combination Agreement with CCH and the Continuing Members. At the closing of the Business Combination (the "Closing") on August 28, 2020 (the "Closing Date"), the Company domesticated into a Delaware corporation and changed its name to "Utz Brands, Inc." At the Closing, the Company (i) acquired certain common and preferred interests of the Continuing Members from third party members (“UPA Seller”), and the Continuing Members then redeemed such common and preferred interests for, and the Company received, an equivalent value of common limited liability company units of UBH, (ii) contributed cash in exchange for additional common limited liability company units of UBH, and (iii) purchased additional common limited liability company units and 100% of the managing interests of UBH from the Continuing Members. As part of the Business Combination, the Continuing Members (a) received certain cash considerations for the common limited liability company units that they sold to the Company, (b) received such number of shares of newly issued non-economic Class V Common Stock in the Company equal to the common limited liability company units that the Continuing Members retained in UBH, and a unit of limited liability company units of UBH and a share of Class V Common Stock are exchangeable for one share of Class A Common Stock of the Company, (c) received certain restricted common limited liability company units in UBH (the "Retained Restricted Units") that would be vested under certain market conditions, which vested as of the Closing, and (d) entered into a Tax Receivable Agreement (“TRA”) that requires the Company to pay to the Continuing Members 85% of the applicable cash savings, if any, in U.S. federal and state income tax determined based on certain attributes as defined in the TRA. In connection with the Closing, UBH and the Company converted all of the outstanding phantom unit awards issued under the Utz Quality Foods, LLC 2018 Long-Term Incentive Plan ("2018 LTIP") into restricted stock units (“2020 LTIP RSUs”) issued by the Company under the Utz Quality Foods, LLC 2020 Long-Term Incentive Plan (the "2020 LTIP"). Further discussion of the purchase consideration of the Business Combination is disclosed later in this footnote. 
 
 The Company 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. Under the ASC 805, Business Combinations, acquisition method of accounting, purchase price allocation of assets acquired and liabilities assumed of UBH are presented based on their estimated fair values as of the Closing. ASC 805 establishes a measurement period to provide the Company with a reasonable amount of time to obtain the information necessary to identify and measure various items in a business combination and cannot extend beyond one year from the acquisition date. 
 
 As a result of the Business Combination, the Company’s financial statement presentation distinguishes UBH as the “Predecessor” through the Closing Date. The Company, which includes consolidation of UBH subsequent to the Business Combination, is the “Successor” for periods after the Closing Date. As a result of the application of the acquisition method of accounting in the Successor period, the financial statements for the Successor period are presented on a full step-up basis as a result of the Business Combination, and are therefore not comparable to the financial statements of the Predecessor period that are not presented on the same full step-up basis due to the Business Combination. 
 
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 The following table summarizes the total business enterprise value, comprised of the fair value of certain purchase consideration paid by the Company to the Continuing Members, the fair value of the noncontrolling interest and the fair value of certain net debt assumed by the Company at Closing: 
 
 (in thousands) 
 Total cash consideration $ 199,161 
 Tax Receivable Agreement obligations to the Continuing Members (1) 
 25,302 
 Replaced Awards (2) 
 11,175 
 Continuing Members’ Retained Restricted Units in UBH (3) 
 54,067 
 Total purchase consideration 289,705 
 Noncontrolling interest (4) 
 896,701 
 Net debt assumed 648,150 
 Total business enterprise value $ 1,834,556 

 (1) Under the terms of the TRA, 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. The fair value of these contingent payments at the Closing was $ 25.3 million which has been recorded as a non-current accrued expense. Refer to Note 15. "Income Taxes" for additional information on the TRA. 
 
 (2) Represents the fair value of the Phantom Units associated with the pre-combination requisite service period and issued under the 2018 LTIP that were converted into 2020 LTIP RSUs of the Company issued under the 2020 LTIP at the Closing. The difference between the fair value of the Phantom Units and the fair values of the 2020 LTIP RSUs represents the fair value of the compensation expenses for the post-combination requisite service period for the replacement awards. Compensation expenses will be recorded evenly during the post-combination requisite service period through the end of fiscal year 2021, which is the cliff vest date of the replacement awards. Refer to Note 11. "Share-Based Compensation" for additional information on the 2020 LTIP RSUs. 
 
 (3) A total of 3,483,022 common limited liability company units that were initially subject to certain restrictions (the "Retained Restricted Units") in UBH were received by the Continuing Members at the Closing. These Retained Restricted Units were vested and converted to common limited liability company units of UBH at the Closing, as the vesting conditions were all met as of the Closing. The fair value of the Retained Restricted Units was calculated based on the stock price of the Company at the August 28, 2020 Closing, less a 5 % lack of marketability discount due to a restriction on the exchange of the Continuing Members’ common limited liability company units to Class A Common Stock of the Company for a period not to exceed 12 months from the Closing. 
 
 (4) The noncontrolling interest represents the common limited liability company units of UBH held by the Continuing Members. The fair value of these units was determined based on the Class A Common Stock price of the Company at the August 28, 2020 Closing, less a 5 % lack of marketability discount due to a restriction on the exchange of the Continuing Members’ common limited liability company units to Class A Common Stock of the Company for a period not to exceed 12 months from the Closing. 
 
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 The following table summarizes the fair values of the assets acquired and liabilities assumed of UBH at Closing: 
 
 (in thousands) 
 Assets acquired: 
 Cash and cash equivalents $ 13,713 
 Accounts receivable 119,339 
 Inventory 63,862 
 Prepaid expenses and other assets 6,116 
 Notes receivable 29,453 
 Property, plant and equipment 269,951 
 Identifiable intangible assets (1) 
 871,150 
 Other assets 7,086 
 Total assets acquired: 1,380,670 
 Liabilities assumed: 
 Accounts payable 49,531 
 Accrued expenses 78,223 
 Notes payable 34,547 
 Deferred tax liability 25,381 
 Total liabilities assumed: 187,682 
 Net identifiable assets acquired 1,192,988 
 Goodwill (2) 
 $ 641,568 

 (1) The Company has determined that certain of the acquired trade names included in intangible assets will be amortized over a period of 15 years, and the customer relationships intangible asset will be amortized over a period of 25 years on a straight-line basis commensurate with the acquisition date expectations for the economic value (i.e. net cash flow generating capability) that is to be provided by the trade names and customer relationships, respectively. 
 
 The fair values allocated to identifiable intangible assets and their estimated useful lives are as follows: 
 
 Fair Value Useful Life 
 (In Thousands) (In Years) 
 Indefinite lived trade names $ 355,500 Indefinite 
 Finite lived trade names 56,000 15 
 Customer relationships 443,500 25 
 Technology 43 5 
 Master distribution rights 2,221 15 
 Company owned routes 13,886 Indefinite 
 Total $ 871,150 

 (2) The goodwill of $ 641.6 million represents the excess of the gross consideration transferred over the fair value of the underlying net tangible and identifiable intangible assets acquired and liabilities assumed. Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not recognized as separate identifiable intangible assets apart from goodwill. Intangible assets not recognized apart from goodwill consist primarily of the strong market position and the assembled workforce of UBH. A portion of the goodwill recognized is expected to be deductible for income tax purposes. As of August 28, 2021, the purchase price allocation had been finalized. 
 
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 The predecessor financial statements of UBH include $ 25.0 million of transaction costs from December 30, 2019 to August 28, 2020. These transaction costs are recorded within administrative expenses within the consolidated statements of operations and comprehensive income. Prior to the Closing Date, CCH incurred $ 13.4 million of transaction costs related to the Business Combination, which are not reported in the predecessor consolidated statements of operations and comprehensive income as CCH is not the predecessor. UBH contributed revenues of $ 325.6 million and net loss of $ 13.8 million in the consolidated statement of operations for the period from the acquisition date of August 28, 2020 to January 3, 2021. 
 
 Truco Holdco Inc. Acquisition and OTB Brand Purchase 
 
 On November 11, 2020 the Company caused its subsidiaries, UQF and Heron, to enter into a Stock Purchase Agreement among UQF, Heron, Truco and Truco Holdings LLC. On December 14, 2020, pursuant to the Stock Purchase Agreement, the Company caused its subsidiary, Heron, to consummate the Truco Acquisition. Upon completion of the Truco Acquisition, Truco became a wholly owned subsidiary of Heron. At the closing of the Truco Acquisition, the Company paid the aggregate cash purchase price of approximately $ 405.1 million to Truco Holdings LLC, including payments of approximately $ 3.0 million for cash on hand at Truco at the closing of the Truco Acquisition, less estimated working capital adjustments, subject to customary post-closing adjustments. 
 
 In addition, on December 14, 2020, UQF consummated the IP Purchase pursuant to which it purchased and acquired from OTB Acquisition, LLC the OTB IP pursuant to an Asset Purchase Agreement, dated November 11, 2020, among UQF, Truco Seller and OTB Acquisition, LLC. The IP Purchase was determined to be an asset acquisition under the provisions of ASC Subtopic 805-50. The IP Purchase is accounted for separately from the Truco Acquisition, as Truco and the OTB IP were acquired from two different selling parties that were not under common control and are two separate transactions. 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 an asset purchase and is treated as an indefinite lived intangible assets. 
 
 For the Truco Acquisition, the Company was determined to be the accounting acquirer and Truco was determined to be the accounting acquiree, in accordance with ASC 805. In accordance with the ASC 805 acquisition method of accounting, the purchase price allocation of assets acquired and liabilities assumed of Truco are presented based on their estimated fair values as of the closing date of the acquisition. ASC 805 establishes a measurement period to provide the Company with a reasonable amount of time to obtain the information necessary to identify and measure various items in a business combination and cannot extend beyond one year from the acquisition date. 
 
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 The following table summarizes the fair values of the assets acquired and liabilities assumed by the Company at the date of the acquisition: 
 
 (in thousands) 
 Purchase consideration $ 405,081 
 Tax consideration (1) 
 3,668 
 Total consideration 408,749 
 Assets acquired: 
 Cash 5,811 
 Accounts receivable 15,609 
 Inventory, net 2,629 
 Prepaid expenses and other assets 4,290 
 Property, plant and equipment 461 
 Other assets 1,219 
 Customer relationships (2) 
 225,000 
 Total assets acquired: 255,019 
 Liabilities assumed: 
 Accounts payable 5,702 
 Accrued expenses 4,492 
 Other liabilities 26 
 Deferred tax liability 50,980 
 Total liabilities assumed: 61,200 
 Net identifiable assets acquired 193,819 
 Goodwill (3) 
 $ 214,930 

 (1) The Stock Purchase Agreement provided that Truco Holdings LLC is entitled to receive any tax refunds received by the Company after the closing date for any pre-closing date tax period of Truco. The Company estimated an income tax refund receivable in the amount of $ 3.7 million related to the pre-acquisition tax periods, which was reflected on the Company's consolidated balance sheet as of January 3, 2021. The Company recorded a corresponding payable of $ 3.7 million to Truco Holdings LLC. 
 
 (2) The identifiable intangible assets represent the existing customer relationships of Truco that were valued using a discounted cash flow model using projected sales growth, attrition and a useful life of 15 years. Truco’s customer relationship fair value is $ 225.0 million. The Company has determined that all the acquired customer relationships will be amortized over a period of 15 years on a straight-line basis commensurate with the acquisition date expectations for the economics that are to be provided by the customer relationships. 
 
 (3) The goodwill of $ 214.9 million represents the excess of the gross consideration transferred over the fair value of the underlying net tangible and identifiable intangible assets acquired and liabilities assumed. Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not recognized as separate identifiable intangible assets apart from goodwill. Intangible assets not recognized apart from goodwill consist primarily of the strong market position and the assembled workforce of Truco. As of December 14, 2021, the purchase price allocation had been finalized. 
 
 The Company incurred $ 5.6 million of transaction costs directly related to the acquisition. These transaction costs are recorded within administrative expenses within the consolidated statements of operations and comprehensive income. Truco contributed revenues of $ 9.7 million and net income of $ 0.8 million in the consolidated statement of operations and comprehensive income (loss) for the period from the acquisition date of December 14, 2020 to January 3, 2021. 
 
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 Vitner's 
 
 On January 11, 2021, the Company announced that its subsidiary, UQF entered into a definitive agreement with Snak-King Corp. to acquire certain assets of the C.J. Vitner business ("Vitner's acquisition" or "acquisition of Vitner's"), a leading brand of salty snacks in the Chicago, IL area. The Company closed this transaction on February 8, 2021 and the purchase price of approximately $ 25.2 million was funded from current cash-on-hand. The provisional fair values to which the purchase price was allocated were $ 2.9 million to trademarks, $ 0.8 million to customer relationships, $ 1.7 million to DSD routes, $ 1.9 million of other net assets, and $ 17.9 million to goodwill. The trademarks and customer relationships are being amortized over a period of 15 years. As of January 2, 2022, the purchase price allocation has not been finalized. We expect to finalize the valuation report and complete the purchase price allocation no later than one-year from the acquisition date. 
 
 Festida Foods 
 
 On May 11, 2021, the Company announced that its subsidiary, UQF entered into a definitive agreement with Great Lakes Festida Holdings, Inc. to acquire all assets including real estate located in Grand Rapids, Michigan related to the operations of Festida Foods ("Festida Foods acquisition" or "acquisition of Festida Foods"), a manufacturer of tortilla chips, corn chips, and pellet snacks, and the largest manufacturer of tortilla chips for the Company's ON THE BORDER® brand. The 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. 
 
 The following table summarizes the provisional fair values of the assets acquired and liabilities assumed by the Company at the date of the acquisition: 
 
 (in thousands) 
 Purchase consideration $ 40,324 
 Assets acquired: 
 
 Accounts receivable 2,776 
 Inventory 2,704 
 Prepaid expenses and other assets 182 
 
 Property, plant and equipment 24,650 
 Customer relationships 1,270 
 Total assets acquired: 31,582 
 Liabilities assumed: 
 Accounts payable 2,017 
 Accrued expenses 844 
 Total liabilities assumed: 2,861 
 Net identifiable assets acquired 28,721 
 Goodwill $ 11,603 

 The customer relationships are being amortized over a period of 10 years. As of January 2, 2022, the purchase price allocation has not been finalized. We expect to finalize the valuation report and complete the purchase price allocation no later than one-year from the acquisition date. 
 
 RW Garcia 
 
 On November 2, 2021, the Company announced that its subsidiaries, entered into a definitive agreement to acquire the equity of R.W. Garcia Holdings, LLC and its' wholly-owned subsidiary R.W. Garcia Co., Inc. ("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, and the cash 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. 
 
 83 

 The following table summarizes the provisional fair values of the assets acquired and liabilities assumed by the Company for the RW Garcia acquisition at the date of the acquisition: 
 
 (in thousands) 
 Purchase consideration $ 56,355 
 Tax consideration 1,992 
 Total consideration 58,347 
 Assets acquired: 
 Cash 5,401 
 Accounts receivable 4,660 
 Inventory 5,674 
 Prepaid expenses and other assets 2,592 
 Property, plant and equipment 20,210 
 Trade name 3,100 
 Customer relationships 4,720 
 Total assets acquired: 46,357 
 Liabilities assumed: 
 Accounts payable 6,017 
 Accrued expenses 1,770 
 Deferred tax liability 6,140 
 Total liabilities assumed: 13,927 
 Net identifiable assets acquired 32,430 
 Goodwill $ 25,917 

 The trade name and customer relationships are being amortized over a period of 15 years. As of January 2, 2022, the purchase price allocation has not been finalized. We expect to finalize the valuation report and complete the purchase price allocation no later than one-year from the acquisition date. 
 
 The following unaudited pro forma financial information presents the results of operations as if the Business Combination, Truco Acquisition, IP Purchase, HKA Acquisition, Kitchen Cooked Acquisition, the Kennedy Acquisition, the Vitner's Acquisition, the Festida Acquisition. and the R.W. Garcia Acquisition had occurred on December 30, 2019. These unaudited pro forma results may not necessarily reflect the actual results of operations that would have been achieved, nor are they necessarily indicative of future results of operations. The unaudited pro forma information reflects the step-up depreciation and amortization adjustments for the fair value of the assets acquired, the adjustment in interest expense due to the reduction in long term debt as a result of the Business Combination, and the related adjustment to the income tax provision. In addition, the pro forma net income is not adjusted to exclude transaction expenses and other non-recurring costs. 
 
 For the year ended January 2, 2022 For the year ended January 3, 2021 
 (in thousands) (unaudited) (unaudited) 
 Pro forma net sales $ 1,219,090 $ 1,252,562 
 Pro forma net income (loss) $ 10,811 $ ( 6,418 ) 
 Pro forma net income (loss) attributable to controlling interest $ 22,132 $ ( 3,226 ) 
 Pro forma net loss attributable to noncontrolling interest $ ( 11,322 ) $ ( 3,192 ) 

 84 

 3. INVENTORIES 
 Inventories consisted of the following: 
 
 (in thousands) As of 
 January 2, 2022 
 As of January 3, 2021 
 
 Finished goods $ 43,533 $ 28,935 
 Raw materials 29,428 25,129 
 Maintenance parts 6,556 5,746 
 Total inventories $ 79,517 $ 59,810 

 4. PROPERTY, PLANT AND EQUIPMENT, NET 
 Property, plant and equipment, net, consisted of the following: 
 
 (in thousands) As of 
 January 2, 2022 
 As of January 3, 2021 
 
 Land $ 25,886 $ 22,750 
 Buildings 98,664 83,780 
 Machinery and equipment 214,319 157,513 
 Land improvements 3,393 2,228 
 Building improvements 3,048 1,047 
 Construction-in-progress 13,745 15,518 
 359,055 282,836 
 Less: accumulated depreciation ( 55,248 ) ( 12,420 ) 
 Property, plant and equipment, net $ 303,807 $ 270,416 

 There were no material fixed asset impairments for the fiscal year 2020 or fiscal year 2021. 
 
 Depreciation expense was $ 43.1 million for the year ended January 2, 2022, $ 12.4 million and $ 19.0 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 was $ 23.6 million for the year ended December 29, 2019. Depreciation expense is classified in cost of goods sold, selling expenses, general and administrative expenses on the consolidated statements of operations and comprehensive income (loss). 
 
 5. GOODWILL AND INTANGIBLE ASSETS, NET 
 A rollforward of goodwill is as follows: 
 
 Predecessor 
 (in thousands) 
 Balance as of December 29, 2019 $ 202,407 
 Acquisition of Kitchen Cooked 4,060 
 Kennedy acquisition adjustment 989 
 Balance as of August 28, 2020 $ 207,456 

 85 

 Successor 
 (in thousands) 
 Balance as of August 29, 2020 $ 644,956 
 Acquisition of H.K. Anderson 3,540 
 Acquisition of Truco 213,687 
 Balance as January 3, 2021 $ 862,183 
 Acquisition of Vitner's 17,880 
 Acquisition of Festida Foods 11,603 
 Acquisition of RW Garcia 25,917 
 Truco acquisition adjustment 1,243 
 Business Combination agreement adjustment ( 3,388 ) 
 Balance as January 2, 2022 $ 915,438 

 Intangible assets, net, consisted of the following: 
 
 (in thousands) As of January 2, 2022 As of January 3, 2021 
 Subject to amortization: 
 Distributor/customer relationships $ 677,930 $ 671,150 
 Technology 43 43 
 Trademarks 63,850 57,810 
 Master distribution rights 2,221 2,221 
 Amortizable assets, gross 744,044 731,224 
 Accumulated amortization ( 45,224 ) ( 8,268 ) 
 Amortizable assets, net 698,820 722,956 
 Not subject to amortization 
 Trade names 434,513 434,513 
 IO routes 9,176 14,240 
 Intangible assets, net $ 1,142,509 $ 1,171,709 

 Amortizable trademark intangible assets increased by $ 6.0 million and distributor/customer relationships increased by $ 6.8 million during fiscal year 2021 due to the acquisition of Vitner's, Festida Foods, and RW Garcia. There were no other changes to intangible assets during the year ended January 2, 2022 other than that which arises from the regular buying and selling of Company owned routes and amortization. 
 Amortization of the distributor/customer relationships, technology, and trademarks amounted to $ 37.0 million for the year ended January 2, 2022, $ 8.3 million and $ 5.1 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 was $ 5.7 million for the year ended December 29, 2019. 
 
 86 

 Amortization expense is classified in administrative expenses on the consolidated statements of operations and comprehensive income (loss). Estimated future amortization expense is as follows: 
 
 (in thousands) As of January 2, 2022 
 2022 $ 37,353 
 2023 37,353 
 2024 37,353 
 2025 37,353 
 2026 37,353 
 Thereafter 512,055 
 Total $ 698,820 

 6. NOTES RECEIVABLE 
 The Company has undertaken a program in recent years to sell company-managed DSD distribution routes to IOs. Contracts are executed between the Company and the IO for the sale of the product distribution route, including a note in favor of the Company, in certain cases. The notes bear interest at rates ranging from 0.00 % to 8.55 % with terms ranging generally from one to ten years . The notes receivable balances due from IOs at January 2, 2022 and January 3, 2021 totaled $ 27.2 million and $ 27.1 million, respectively, and are collateralized by the routes for which the loans are made. Of the balance at January 2, 2022 and January 3, 2021, $ 24.8 million and $ 23.1 million, respectively, relates to a corresponding notes payable, as discussed in further detail within “Note 8. Long-Term Debt”. 
 Other notes receivable totaled $ 0.2 million and $ 0.6 million as of January 2, 2022 and January 3, 2021, respectively. 
 
 7. ACCRUED EXPENSES AND OTHER 
 Current Accrued expenses and other consisted of the following: 
 
 (in thousands) As of January 2, 2022 As of January 3, 2021 
 Accrued compensation and benefits $ 20,081 $ 36,968 
 Operating ROU liability (see "Note 16. Leases") 9,152 — 
 Insurance liabilities 8,620 8,100 
 Accrued freight and manufacturing related costs 8,928 6,972 
 Acquisition tax consideration 5,660 4,468 
 Accrued dividends 4,189 4,261 
 Short term interest rate hedge liability 4,548 3,048 
 Accrued sales tax 1,300 1,300 
 Accrued interest 371 1,220 
 Other accrued expenses 8,431 14,451 
 Total accrued expenses and other $ 71,280 $ 80,788 

 Non-current accrued expenses and other consisted of the following: 
 
 (in thousands) As of January 2, 2022 As of January 3, 2021 
 TRA liability 
 $ 24,443 $ 28,691 
 Operating ROU liability (see "Note 16. Leases") 23,226 — 
 Supplemental retirement and salary continuation plans 8,117 6,901 
 Long term portion of an interest rate hedge liability — 2,082 
 Other long term accrued expenses 52 97 
 Total accrued expenses and other $ 55,838 $ 37,771 

 87 

 8. LONG-TERM DEBT 
 Revolving Credit Facility 
 On November 21, 2017, UBH entered into an asset based revolving credit facility (as amended, the “ABL facility”) in an initial aggregate principal amount of $ 100.0 million. The ABL facility was set to expire on the fifth anniversary of closing, or November 21, 2022. 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. As of January 2, 2022 and January 3, 2021, $ 36.0 million and $ 0.0 million , respectively, 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 %). 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 $ 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. The proceeds of the Term Loans were used to refinance the Company’s January 2017 credit facility and fund the acquisition of Inventure Foods and the repurchase of the predecessor membership units held by a minority investor. 
 The First Lien Term Loan requires quarterly principal payments of $ 1.3 million beginning March 2018, with a balloon payment due for any remaining balance on the seventh anniversary of closing, or November 21, 2024. On August 28, 2020, as part of the Business Combination (as described in Note 1. " Operations and Summary of Significant Accounting Policies" and Note 2. "Acquisitions") an advance payment of principal was made on the First Lien Term Loan of $ 111.6 million, as such no principal payments are due until November 21, 2024. 
 The Company incurred closing and other costs associated with the Term Loans, which were allocated to each loan on a specific identification basis based on original principal amounts. Finance fees allocated to the First Lien Term Loan and the Second Lien Term Loan were $ 10.7 million and $ 4.1 million, respectively, which were presented net within “non-current portion of debt” on the consolidated balance sheets for the Predecessor periods. Deferred fees are amortized ratably over the respective lives of each term loan. 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". 
 On October 1, 2019, the Company repaid the Second Lien Term Loan with the proceeds of the sale of preferred and common units by Series U, Series R, and SRS. The Company accounted for the repayment of the Second Lien Term Loan as a debt extinguishment as the investors who purchased the preferred units and common units were not parties to the Second Lien Term Loan. The total repayment was $ 126.3 million, and resulted in a loss on early extinguishment of approximately $ 4.3 million. 
 Separately, on October 21, 2019, the Company entered into a Senior Secured First Lien Floating Rate Note (the “Secured First Lien Note”) in a principal amount of $ 125.0 million. Proceeds from the Secured First Lien Note were used primarily to finance the Kennedy Acquisition. The Secured First Lien Note requires quarterly interest payments, with a repayment of principal on the maturity date of November 21, 2024. 
 88 

 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. As of January 3, 2021, the outstanding balance of the Bridge Credit Agreement was $ 370.0 million, with $ 120.0 million being repaid from the redemption of the Company's warrants. Commitment fees and deferred financing costs on the Bridge Credit Agreement totaled $ 7.2 million, of which $ 2.6 million remained on the books as of January 3, 2021. 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. 3"). Pursuant to the terms of Amendment No. 3, the Company increased the principal balance of Term Loan B by $ 75.0 million to bring the aggregated balance of Term Loan B proceeds to $ 795.0 million. 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. 
 Long-term debt consisted of the following: 
 
 Debt (in thousands) 
 Issue Date Principal Balance Interest Rate Maturity Date January 2, 2022 January 3, 2021 
 Term loan B June-21 $ 795,000 3.09 % January-28 $ 787,236 $ — 
 First lien term loan credit agreement November-17 535,000 3.64 % November-24 — 404,650 
 Second lien term loan credit agreement November-17 125,000 6.25 % November-24 — 5,350 
 Bridge credit agreement December-20 490,000 4.40 % December-25 — 370,000 
 Equipment loans (1) 
 25,958 — 
 Miscellaneous equipment loans 697 1,108 
 Revolving credit facility 36,000 — 
 Net impact of debt issuance costs and original issue discounts ( 7,929 ) ( 2,639 ) 
 Total long-term debt 841,962 778,469 
 Less: current portion ( 11,414 ) ( 469 ) 
 Long term portion of term debt and financing obligations $ 830,548 $ 778,000 

 (1) 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 %. 
 89 

 Amounts outstanding under term debt and financing obligations consisted of the following: 
 
 (in thousands) 
 2022 $ 11,414 
 2023 11,431 
 2024 47,538 
 2025 11,457 
 2026 10,159 
 Thereafter 757,892 
 Total $ 849,891 

 Term loan B, the Revolving Credit Facility, and the equipment loans are debt of UBH and its’ subsidiaries. There are no material differences between the financial statements of UBI and consolidated subsidiaries and the financial statements of UBH and consolidated subsidiaries, except for the Warrant liability and associated gain (loss) on remeasurement of warrant liability as described in “Note 17. Warrants” and the Tax Receivable Agreement described in “Note 2. Acquisitions” and cash or cash equivalent of $ 5.3 million held at UBI as of fiscal year end 2021. The cash on hand is primarily the result of distributions from UBH and is primarily used to pay dividends to shareholders and make tax payments. 
 
 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 within fiscal 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 (1) 
 8,166 8,967 
 Other 1,678 1,509 
 Total notes payable 34,666 33,582 
 Less: current portion ( 9,957 ) ( 9,018 ) 
 Long term portion of notes payable $ 24,709 $ 24,564 

 (1) See “Note 16. Leases” for further discussion on our finance lease obligations. 
 90 

 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 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 April 2030. 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 
 Interest expense consisted of the following: 
 
 Successor Predecessor 
 (in thousands) Year Ended January 2, 2022 From 
August 29, 2020
through 
January 3, 2021 From 
December 30, 2019
through 
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 

 9. DERIVATIVE FINANCIAL INSTRUMENTS AND PURCHASE COMMITMENTS 
 Derivative Financial Instruments 
 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. 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 transactions 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. Fair Value Measurements” and “Note 13. Accumulated Other Comprehensive (Loss) Income.” 
 91 

 Warrant Liabilities 
 The Company has outstanding warrants which are accounted for as derivative liabilities pursuant to ASC 815-40. See Note 17. "Warrants" for additional information on our warrant liabilities. A reconciliation of the changes in the warrant liability for the year ended January 2, 2022 is as follows: 
 
 (in thousands) 
 Fair value of warrant liabilities as of January 3, 2021 $ 137,612 
 Reclassification of warrant liability to equity for exercised or cancelled warrants ( 54,713 ) 
 Gain on remeasurement of warrant liability ( 36,675 ) 
 Fair value of warrant liabilities as of January 2, 2022 $ 46,224 

 Purchase Commitments 
 The Company has outstanding purchase commitments for specific quantities at fixed prices for certain key ingredients to economically hedge commodity input prices. These purchase commitments totaled $ 34.7 million as of January 2, 2022. The Company accrues for losses on firm purchase commitments in a loss position at the end of each reporting period to the extent that there is an active observable market. 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. 
 
 10. FAIR VALUE MEASUREMENTS 
 The Company follows the guidance relating to fair value measurements and disclosures with respect to financial assets and liabilities that are re-measured and reported at fair value each reporting period, and with respect to non-financial assets and liabilities that are not required to be measured at fair value on a recurring basis. The guidance establishes a fair value hierarchy that prioritizes the inputs to the valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level I) and the lowest priority to unobservable pricing inputs (Level III). A financial asset or liability’s level within the fair value hierarchy is based upon the lowest level of any input that is significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are described below: 
 Level I - Valuations are based on unadjusted quoted prices in active markets for identical, unrestricted assets or liabilities; 
 Level II - Valuations are based on quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active. Financial asset or liabilities which are included in this category are securities where all significant inputs are observable, either directly or indirectly; and 
 Level III - Prices or valuations that are unobservable and where there is little, if any, market activity for these financial assets or liabilities. The inputs into the determination of fair value inputs for these investments require significant management judgment or estimation. The availability of observable inputs can vary depending on the financial asset or liability and is affected by a wide variety of factors. To the extent that valuation is based on inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. 
 The fair values of the Company’s Level II derivative instruments were determined using valuation models that use market observable inputs including interest rate curves and both forward and spot prices for commodities. Derivative assets and liabilities included in Level II primarily represent commodity and interest rate swap contracts. 
 The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis based upon the level within the fair value hierarchy in which the fair value measurements fall, as of January 2, 2022: 
 92 

 (in thousands) Level I Level II Level III Total 
 Assets: 
 Cash and cash equivalents $ 41,898 $ — $ — $ 41,898 
 Interest rate swaps — 2,208 — 2,208 
 Total assets $ 41,898 $ 2,208 $ — $ 44,106 
 Liabilities 
 Commodity contracts $ — $ 54 $ — $ 54 
 Interest rate swaps — 4,600 — 4,600 
 Debt — 841,962 — 841,962 
 Total liabilities $ — $ 846,616 $ — $ 846,616 

 The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis based upon the level within the fair value hierarchy in which the fair value measurements fall, as of January 3, 2021: 
 
 (in thousands) Level I Level II Level III Total 
 Assets: 
 Cash and cash equivalents $ 46,831 $ — $ — $ 46,831 
 Total assets $ 46,831 $ — $ — $ 46,831 
 Liabilities 
 Commodity contracts $ — $ 248 $ — $ 248 
 Interest rate swaps — 5,163 — 5,163 
 Public warrants 52,580 — — 52,580 
 Private placement warrants — 85,032 — 85,032 
 Debt — 778,469 — 778,469 
 Total liabilities $ 52,580 $ 868,912 $ — $ 921,492 

 93 

 11. SHARE-BASED COMPENSATION 
 For the periods presented, compensation expense included in selling and general and administrative expense for all types of stock-based compensation programs and the related income tax benefit recognized were as follows: 
 
 Successor Predecessor 
 (in thousands) Year Ended January 2, 2022 From 
August 29, 2020
through 
January 3, 2021 From 
December 30, 2019
through 
August 28, 2020 Year Ended December 29, 2019 
 RSUs $ 8,574 $ 6,176 $ — $ — 
 PSUs 1,228 401 — — 
 Stock Options 493 213 — — 
 Pre-tax compensation expense $ 10,295 $ 6,790 $ — $ — 
 
 The tax benefit recognized from the share-based compensation expense is immaterial. 
 Unrecognized compensation expense related to nonvested share-based compensation grants was as follows: 
 
 (in thousands) As of January 2, 2022 As of January 3, 2021 
 RSUs $ 1,248 $ 10,021 
 PSUs 1,710 2,960 
 Stock Options 1,044 1,565 
 Total $ 4,002 $ 14,546 

 Restricted and Performance Share Units 
 2020 LTIP RSUs 
 In connection with the Business Combination, the Phantom Units issued under the 2018 LTIP were converted into the 2020 LTIP RSUs issued under the 2020 LTIP, with each RSU vesting on December 31, 2021, provided that if a change in control of Utz, under the terms of the 2020 LTIP occurs prior to December 31, 2021, the 2020 LTIP RSUs will become 100% vested, unless earlier forfeited under their terms, and representing an unfunded, unsecured promise by the Company to issue a participant one share of Class A Common Stock. Holders of 2020 LTIP RSUs are subject to substantially similar terms to the holders of Phantom Units, including requisite service period and vesting conditions. The conversion of the 2018 LTIP Phantom Units was accounted for as a modification under ASC 718. The 2020 LTIP RSUs are equity-classified due to settlement being in shares. 
 As a result of the Business Combination, the Company converted the Phantom Units under the 2018 LTIP into 2020 LTIP RSUs, which may settle into up to 1,479,445 shares of Class A Common Stock plus such number of shares the Company may deliver, in its discretion, to satisfy certain gross-up obligations, under the 2020 LTIP at a fair value of $ 16.34 per unit to holders of the Phantom Units. The fair value of the Phantom Units being replaced was approximately $ 11.2 million at the Closing, which was attributable to the pre-combination service period and was included in the purchase price of the Business Combination. The fair value of the 2020 LTIP RSUs at the Closing of the Business Combination in excess of the fair value of the replaced Phantom Units attributable to the pre-combination period was approximately $ 13.9 million and is attributable to the post-combination requisite service period. 
 94 

 Restricted Share Units 
 Under the 2020 Plan, the Company granted certain employees and directors RSUs as a result of their significant contributions. These grants will settle upon vesting into shares of the Company’s Class A Common Stock, subject to continued employment. The Initial Grant RSUs for directors will vest on May 6, 2021, while the Initial Grant RSUs for certain employees will vest in equal installments on December 31, 2022 and December 31, 2023. In conjunction with the vesting of the Initial Grant RSUs, the Company granted additional RSUs to directors that will vest on May 5, 2022. Subject to the vesting of such awards, the RSUs participated in dividends of the Company beginning with the fiscal 2020 end-of-year dividend declaration, which was paid out in the first quarter of fiscal year 2021. 
 Performance Share Units 
 The Company issued PSUs as part of the 2020 Plan, which settle into shares of the Company’s Class A Common Stock subject to the continued employment of the grantees and achievement of certain performance criteria, provided that the issuance of the PSUs was contingent upon the Company filing a Form S-8 with the SEC, which occurred on November 2, 2020. The number of PSUs that will vest is determined by the Company’s Class A Common Stock achieving a certain Total Shareholder Return (“TSR”) for the Company, relative to the TSR of a specified peer group. Depending on the Company’s TSR relative to the peer group TSR, the actual number of shares that will be vested can range from zero and up to 200 % of the initial grant. The awards will vest 50 % on December 31, 2022 and 50 % on December 31, 2023, subject to the market condition described above. Subject to the vesting of such awards, the PSUs will participate in dividends of the Company beginning with the fiscal 2020 end-of-year dividend declaration, which was paid out in the first quarter of fiscal year 2021. Since the PSUs vest based on market conditions, a Monte Carlo simulation model was used to determine the grant-date fair value of the PSUs. The assumptions used in the Monte Carlo simulation model included a weighted average expected term of 2.8 years, weighted average expected volatility of 53.6 %, and weighted average risk-free rate of 0.2 %. 
 
 Performance Stock Units and Restricted Stock Units Number of Units Weighted-average grant date fair value for equity awards (per unit) Weighted Average Remaining Contractual Term 
 Outstanding at beginning of year $ 1,608,502 $ 10.57 2.3 Years 
 Granted 42,321 26.57 
 Vested ( 1,376,536 ) 7.91 
 Forfeited ( 6,928 ) 19.88 
 Outstanding and exercisable at end of year $ 267,359 $ 22.33 1.5 Years 

 Stock Options 
 The Company granted its Executive Leadership Team stock options exercisable for Class A Common Stock of the Company, provided that the exercise of such stock options was contingent upon the Company filing a Form S-8 with the SEC, which occurred on November 2, 2020. Subject to continued employment, 50% of these options will vest on December 31, 2022 and 50% on December 31, 2023. The Company granted 286,268 stock options on August 28, 2020 and the exercise price of the options is the Company’s closing share price of $ 16.34 on August 28, 2020. The stock options have a maximum contractual life of 10 years from the grant date. No options were exercised or forfeited during the Successor period, and no stock options were granted prior to the Business Combination. 
 
 The fair value of each stock option granted was determined to be $ 7.38 using the Black-Scholes Option Pricing Model based on an expected volatility of 46.8 %, expected option term of approximately 6.4 years, and risk-free rate of return of 0.4 %. The risk-free rates are based on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term. The expected option term was determined based on the simplified method as allowable under ASC 718 due to a lack of sufficient trading history for the Company’s common stock. The use of this method effectively assumes that exercise occurs evenly over the period from vesting until expiration, and therefore the expected term is the midpoint between the service period and the contractual term of the award. 
 
 95 

 Stock Options Number of Units Weighted-Average Grant Date Fair Value for Equity Awards (per unit) Weighted Average Remaining Contractual Term Aggregate Intrinsic Value (1) 
 
 Outstanding at beginning of year 286,268 $ 16.34 2.3 Years 
 Granted — — 
 Vested — — 
 Forfeited — — 
 Outstanding and exercisable at end of year 286,268 $ 16.34 1.5 Years 0.00 

 (1) The aggregate intrinsic value in the above table represents the total pre-tax amount that a participant would receive if the option had been exercised on the last day of the respective fiscal period. Options with a market value less than its exercise value are not included in the intrinsic value amount. 
 
 Employee Stock Purchase Plan 
 
 On December 10, 2020, the Board of Directors approved the 2021 Employee Stock Purchase Plan (“ESPP”), subject to stockholder approval. The ESPP was effective January 1, 2021, and purchase rights may be granted under the ESPP prior to stockholder approval, but no purchase rights may be exercised unless and until stockholder approval is obtained. 
 
 The maximum number of shares of the Company’s Class A Common Stock available for sale under the ESPP shall not exceed in the aggregate 1,500,000 shares, and may be unissued shares or treasury shares or shares bought on the market for purposes of the ESPP. 
 
 Under the ESPP, employees are offered the option to purchase discounted shares of Class A Common Stock during offering periods designated by the administrator. Each offering period will be one year , consisting of two six-month purchase periods, commencing on each January 1 and July 1 following the effective date of the ESPP. The initial offering under the ESPP will commence on January 1, 2021 and end on December 31, 2021. Shares are purchased on the applicable exercise dates, which is the last trading day of each purchase period with initial purchase dates of June 30, 2021 and December 31, 2021. The purchase price will be 90 % of the lower of (i) the fair market value of the stock on the date of enrollment and (ii) the fair market value of the stock on the last day of the related purchase period. As of January 30, 2021, 7.7 million shares of Class A common stock were available for issuance under the ESPP, and employee contributions had not yet commenced. For the year ended January 2, 2022, the Company granted 128,642 shares with a fair value of $ 2.7 million, and the Company recognized compensation expense of $ 0.5 million. 
 
 12. CONTINGENCIES 
 Litigation Matters 
 The Company is involved in litigation and other matters incidental to the conduct of its business, the results of which, in the opinion of management, are not likely to be material to the Company’s financial condition, results of operations or cash flows. 
 Tax Matters 
 The Company received an assessment from the Commonwealth of Pennsylvania pursuant to a sales and use tax audit for the period from January 1, 2014 through December 31, 2016. As of January 2, 2022 and January 3, 2021, the Company had a reserve of $ 1.3 million to cover the assessment. 
 Guarantees 
 The Company partially guarantees loans made to IOs by Cadence Bank for the purchase of routes. The outstanding balance of loans guaranteed was $ 2.2 million and $ 4.1 million at January 2, 2022 and January 3, 2021, respectively, which are accounted for 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. 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. 
 96 

 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 $ 18.6 million and $ 7.1 million at January 2, 2022 and January 3, 2021, respectively, which are accounted for as an off balance sheet arrangement. 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 2, 2022 and January 3, 2021 was $ 19.7 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 balance sheet; the corresponding note receivable also remained on the Company’s balance sheet. 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 $ 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. 
 Unclaimed Property 
 The Company was notified in September 2016 that several states requested an audit of the Company’s unclaimed property practices. The states initiating the audit include Connecticut, Idaho, Maryland, Massachusetts, New Hampshire, New York, South Dakota, and Tennessee but was later expanded to include a total of 22 states. The audit is limited to UQF and does not include any other legal entities. The audit consists of three components including accounts payable, payroll, and accounts receivable customer over-payments. The Company estimates that the potential liability for the accounts payable and payroll components is approximately $ 0.2 million, which has been included in the other accrued expenses section of the balance sheet as of January 2, 2022 and January 3, 2021. As of the date of these financial statements, the Company is not able to reasonably estimate the potential liability for the accounts receivable customer over-payments. 
 
 13. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) 
 Total accumulated other comprehensive income was $ 3.7 million as of January 2, 2022 and $ 0.9 million as of January 3, 2021. Total accumulated other comprehensive income (loss) consists solely of unrealized gains (losses) from the Company’s derivative financial instruments accounted for as cash flow hedges. 
 Changes to the balance in accumulated other comprehensive income (loss) were as follows: 
 
 Successor 
 (in thousands) Gains on
Cash Flow Hedges 
 Balance as of August 29, 2020 $ — 
 Unrealized gain on cash flow hedges 924 
 Balance as of January 3, 2021 924 
 Unrealized gain on cash flow hedges 2,791 
 Balance as of January 2, 2022 $ 3,715 

 Predecessor 
 (in thousands) Loss on
Cash Flow Hedges 
 
 Balance as of December 29, 2019 $ 1,408 
 Unrealized loss on cash flow hedges ( 7,463 ) 
 Balance as of August 28, 2020 $ ( 6,055 ) 

 97 

 14. SUPPLEMENTARY CASH FLOW INFORMATION 
 Cash paid for interest was $ 31.6 million for the year ended January 2, 2022, $ 9.2 million and $ 28.8 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 was $ 45.7 million for the year ended December 29, 2019. Refunds related to income related taxes were $ 0.7 million for the year ended January 2, 2022, $ 0.1 million and $ 0.2 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 was $ 0.1 million for the year ended December 29, 2019. Payments made for income-related taxes were $ 3.7 million for the year ended January 2, 2022, $ 0.5 million and $ 0.5 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 was $ 1.7 million for the year ended December 29, 2019. The following non cash considerations were part of the Business Combination Agreement with CC H: Continuing Members' retained restricted units totaling $ 54.1 million, TRA totaling $ 25.3 million, and LTIP RSU awards totaling $ 11.2 million . Dividends declared but not paid were $ 4.2 million and $ 4.3 million as of January 2, 2022 and January 3, 2021, respectively, and are included within the "accrued expense and other" of the Consolidated Balance Sheet. 
 
 15. INCOME TAXES 
 The Company is subject to federal and state income taxes with respect to our allocable share of any taxable income or loss of Utz Brands Holdings, LLC, as well as any standalone income or loss the Company generates. Utz Brands Holdings, LLC is treated as a partnership for federal income tax purposes, and for most applicable state and local income tax purposes, and generally does not pay income taxes in most jurisdictions. Instead, Utz Brands Holdings, LLC taxable income or loss is passed through to its members, including the Company. Despite its partnership treatment, Utz Brands Holdings, LLC is liable for income taxes in those states not recognizing its pass-through status and for certain of its subsidiaries not taxed as pass-through entities. The Company has acquired various domestic entities taxed as corporations, which are now wholly-owned by us or our subsidiaries. Where required or allowed, these subsidiaries also file and pay tax as a consolidated group for federal and state income tax purposes. The Company anticipates this structure to remain in existence for the foreseeable future. 
 
 The provision (benefit) for income taxes was as follows: 
 
 Successor Predecessor 
 (in thousands) Year Ended January 2, 2022 From 
August 29, 2020
through 
January 3, 2021 From 
December 30, 2019
through 
August 28, 2020 Year Ended December 29, 2019 
 Current: 
 Federal $ 1,553 $ — $ — $ 140 
 State 2,010 ( 219 ) 1,301 1,057 
 Total current 3,563 ( 219 ) 1,301 1,197 
 Deferred: 
 Federal ( 1,949 ) ( 528 ) 3,197 1,650 
 State 6,472 480 ( 525 ) 299 
 Total deferred 4,523 ( 48 ) 2,672 1,949 
 Total $ 8,086 $ ( 267 ) $ 3,973 $ 3,146 

 98 

 A reconciliation of the expected statutory federal tax and the total income tax expense (benefit) was as follows: 
 
 Successor Predecessor 
 (in thousands) Year Ended January 2, 2022 From 
August 29, 2020
through 
January 3, 2021 From 
December 30, 2019
through 
August 28, 2020 Year Ended December 29, 2019 
 Federal statutory rate (21%) $ 3,378 $ ( 22,715 ) $ 1,552 $ ( 2,146 ) 
 State income taxes, net of federal benefit 6,440 393 641 1,755 
 Pre-transaction loss of Utz Brands Holdings, LLC — — 1,752 4,204 
 Investment in Utz Brands Holdings, LLC ( 31 ) ( 23,844 ) — — 
 Noncontrolling interest in Utz Brands Holdings, LLC 2,448 1,497 — — 
 Valuation allowance 5,195 25,121 — ( 683 ) 
 Remeasurement of warrant liability ( 7,702 ) 19,288 — — 
 Return to provision ( 771 ) — — — 
 Permanent book to tax differences ( 593 ) — — — 
 Credits ( 239 ) — — — 
 IRC §162(m) 191 — — — 
 Nondeductible expenses 12 — 8 6 
 Other ( 242 ) ( 7 ) 20 10 
 $ 8,086 $ ( 267 ) $ 3,973 $ 3,146 

 99 

 The tax effect of temporary differences that gave rise to significant components of deferred tax assets and liabilities consisted of the following at January 2, 2022 and January 3, 2021: 
 
 (in thousands) 
 As of January 2, 2022 As of January 3, 2021 
 Deferred Tax Assets: 
 Accrued expenses $ 716 $ 279 
 Pension, retirement and other benefits 501 532 
 Inventories, including uniform capitalization 664 201 
 Investment in Utz Brands, LLC, Operations 25,454 25,724 
 Acquisition costs 818 985 
 Net operating losses 24,481 18,887 
 IRC §163(j) 1,980 — 
 Credits 224 108 
 Charitable contributions 38 — 
 Other deferred tax assets 203 509 
 Total gross deferred tax assets 55,079 47,225 
 Valuation allowance ( 43,523 ) ( 32,530 ) 
 Net deferred tax assets 11,556 14,695 
 Deferred Tax Liabilities: 
 Plant and equipment, accelerated depreciation ( 16,149 ) ( 12,560 ) 
 Intangibles ( 79,861 ) ( 75,681 ) 
 Investment in Utz Brands Holdings, LLC, Nonreversing ( 51,455 ) — 
 Other deferred tax liabilities ( 425 ) ( 240 ) 
 Total deferred tax liabilities ( 147,890 ) ( 88,481 ) 
 Net deferred tax liabilities $ ( 136,334 ) $ ( 73,786 ) 

 On March 27, 2020, the U.S. federal government enacted the Coronavirus Aid, Relief and Economic Security Act (the CARES Act) and on December 27, 2020 enacted the Consolidated Appropriations Act, 2021, neither of which had a material impact on our provision for income taxes. 
 
 Net Operating Loss and Tax Credit Carryforward 
 
 As of January 2, 2022 and January 3, 2021, the Company and certain subsidiaries have federal net operating loss ("NOL") carryforwards of $ 96.1 million and $ 77.7 million, respectively. Of these, $ 41.0 million will expire, if not utilized, by 2037. 
 
 As of January 2, 2022 and January 3, 2021, the Company and certain subsidiaries also have state NOL carryforwards in the amount of $ 75.9 million and $ 44.2 million, respectively. The state NOL carryforwards begin to expire in 2021, however, some state NOL's are able to be carried forward indefinitely. 
 
 As of January 2, 2022 and January 3, 2021, the Company and certain subsidiaries have federal tax credit carryforwards in the amount of $ 0.2 million and $ 0.0 million , respectively. 
 
 As of January 2, 2022 and January 3, 2021, certain subsidiaries have state tax credit carryforwards in the amount of $ 0.0 million and $ 0.1 million, respectively. 
 
 Utilization of some of the federal and state net operating loss and credit carryforwards are subject to annual limitations due to the “change in ownership” provisions of the Internal Revenue Code and similar state provisions. The annual limitations may result in the expiration of net operating losses and credits before utilization. 
 
 100 

 Valuation Allowance 
 
 The Company recorded a valuation allowance of $ 43.5 million and $ 32.5 million at January 2, 2022 and January 3, 2021, respectively. In determining the need for a valuation allowance, the Company assessed the available positive and negative evidence to estimate whether future taxable income would be generated to permit use of the existing deferred tax assets (“DTA's”). As of January 2, 2022, a significant piece of objective negative evidence evaluated was the three-year cumulative loss before taxes. Such objective evidence limits the ability to consider other subjective evidence, such as projections for future growth. The Company determined that there is uncertainty regarding the utilization of certain DTA's such as the investment in Utz Brands Holdings, LLC, federal operating losses subject to annual limitations due to “change in ownership” provisions, and state net operating losses where the Company does not expect to continue to have nexus. Therefore, a valuation allowance has been recorded against the DTA's for which it is more-likely-than-not they will not be realized. The Company has DTA’s related to its investment in partnership that are expected to be realized in the ordinary course of operations or generate future net operating losses for which a portion will have an indefinite carryforward period. Additionally, the Company has deferred tax liabilities (“DTL’s”) related to its investment in the partnership that will not reverse in the ordinary course of business and will only reverse when the partnership is sold or liquidated. The Company has no intention of disposing of or liquidating the partnership and therefore has not considered the indefinite lived DTL as a source of income to offset other DTA’s. In weighing positive and negative evidence, both objective and subjective, including its three-year cumulative loss, the Company has recorded a valuation allowance against its DTA’s related to net operating losses and deductible book/tax differences and recorded a DTL primarily related to the book over tax basis in the investment in the partnership that will not reverse in the ordinary course of operations. The Company considered that an indefinite lived DTL may be considered as a source of taxable income for an indefinite lived DTA; however, given our indefinite lived DTL will only reverse upon sale or liquidation, the Company determined that it was more appropriate to record a valuation allowance against its DTA’s. The amount of DTA considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as projections for growth. 
 
 The net change in valuation allowance of $ 11.0 million was recorded as an increase to income tax expense for $ 5.2 million offset and an adjustment to increase equity for $ 5.8 million as it related to the direct tax effect of changes in tax basis in the investment in Utz Brands Holdings, LLC. 
 
 As of January 2, 2022, tax years 2018 through 2021 remain open and subject to examination by the Internal Revenue Service and the majority of the states where the Company has nexus, and tax years 2017 through 2021 remain open and subject to examination in selected states that have a four year statute of limitations. 
 
 Upon audit, tax authorities may challenge all or part of a tax position. A tax position successfully challenged by a taxing authority could result in an adjustment to our provision for income taxes in the period in which a final determination is made. The Company did not maintain any unrecognized tax benefits as of January 2, 2022 and January 3, 2021. 
 
 Tax receivable agreement liability 
 
 Pursuant to an election under section 754 of the Internal Revenue Code, the Company obtained an increase in its share of the tax basis in the net assets of UBH when it was deemed to purchase UBH units from the UPA Seller and purchased UBH units from the Continuing Members per the Business Combination. The Continuing Members have the option to exchange UBH units for UBI common stock post-Business Combination. The Company intends to treat any such exchanges as direct purchases for U.S. federal income tax purposes, which is expected to further increase its share of the tax basis in the net assets of UBH. The increases in tax basis may reduce the amounts the Company would otherwise pay in the future to various tax authorities. They may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets. 
 
 Pursuant to the Business Combination Agreement, the Company entered into the TRA, which provides for the payment by the Company of 85% of the amount of any tax benefits realized as a result of (i) increases in the share of the tax basis in the net assets of UBH resulting from the Business Combination and any future exchanges by the Continuing Members of UBH units for UBI common stock; (ii) tax basis increases attributable to payments made under the TRA; and (iii) tax amortization deductions attributable to the acquisition of Kennedy and the election to treat the transaction as an asset deal for tax purposes (the "TRA Payments"). The rights of each party under the TRA other than the Company are assignable, subject to certain restrictions. The timing and amount of aggregate payments due under the TRA may vary based on a number of factors, including the timing and amount of taxable income generated by the Company each year, as well as the tax rate then applicable, among other factors. 
 
 101 

 As of January 2, 2022, the Company recorded a TRA liability of $ 24.6 million, but it has a total liability of $ 38.2 million related to its projected obligations under the TRA. The total TRA liability includes $ 24.6 million that relates to payments that originated with the Business Combination and the acquisition of Kennedy and $ 13.6 million that relates to equity transactions that occurred during the 4th quarter 2020 and 3rd quarter 2021. The Company recorded a valuation allowance on its DTA, including the tax basis that originated with the 4th quarter 2020 and 3rd quarter 2021 equity transactions as they are not more likely than not to be realized based on the positive and negative evidence that the Company considered. The Company has not recorded the $ 13.6 million of TRA liability that relates to the 4th quarter 2020 and 3rd quarter 2021 equity transactions as the liability is not probable under ASC 450 since the related DTA is not more likely than not to be realized as evidenced by the valuation allowance. The Company will continue to monitor positive and negative evidence to analyze its valuation allowance and it believes that sufficient positive evidence may arise to permit the release of a significant portion of its valuation allowance. If that were to occur, it would result in the need to record $ 13.6 million of additional TRA liability for 4th quarter 2020 and 3rd quarter 2021 equity transactions, which would result in a non-cash charge to pretax results. 
 
 16. LEASES 
 
 As described in Note 1. " Operations and Summary of Significant Accounting Policies", we adopted new lease accounting guidance effective January 4, 2021. 
 
 We determine if a contractual arrangement is a lease at inception. Our lease arrangements provide the Company the right to utilize certain specified tangible assets for a period of time in exchange for consideration. Our leases primarily relate to building space, vehicles, and equipment. Our leases generally have remaining terms ranging from one month to twelve years . 
 
 We separate lease components from vehicles leases and do not separate non-lease components from our building leases for the purposes of measuring our lease liabilities and assets. Our leases consist of operating leases and finance leases which are presented within current accrued expenses and other, non-current accrued expenses and other, current portion of other notes payable, and non-current portion of other notes payable on our consolidated balance sheets. Leases with an initial term of 12 months or lease are not recorded on the balance sheet. 
 
 We recognize a lease liability and a right of use asset at the lease commencement date based on the present value of future lease payments over the lease term discounted using our incremental borrowing rate. As many of our leases do not provide an implicit rate, we use our incremental borrowing rate based on information available at the commencement date in determining the present value of lease payments. 
 
 We recognize operating lease expense on a straight-line basis over the term of the lease within operating expenses. Expense associated with our finance leases consists of two components, including interest on our outstanding finance lease obligations and amortization of the related right-of-use assets. The interest component is recorded in interest expense and depreciation of the finance lease asset is recognized over a straight-line basis over the term of the lease within cost of goods sold, selling expenses, and administrative expenses on the consolidated statements of operations and comprehensive income (loss). 
 
 Our leases do not contain material residual value guarantees or material restrictive covenants. Some of our leases include optional renewal periods or termination provisions which we assess at inception to determine the term of the lease, subject to reassessment in certain circumstances. 
 
 The following table presents lease expense we have recorded on our consolidated statements of operations for the year ended January 2, 2022: 
 
 (in thousands) 
 Year Ended January 2, 2022 
 Finance lease expense: 
 Amortization of finance ROU asset $ 2,553 
 Interest of finance ROU asset 254 
 Total finance lease expense 2,807 
 Operating lease expense (1) 
 9,118 
 Total lease expense $ 11,924 

 102 

 (1) Included variable and short-term lease expense of $ 2.1 million and $ 3.4 million, respectively, for the year ended January 2, 2022. 
 
 Finance leases, net, are included in Property, Plant and Equipment as follows: 
 
 (in thousands) 
 As of
January 2, 2022 As of
January 3, 2021 
 Leases $ 10,863 $ 9,335 
 Less: accumulated depreciation 2,863 526 
 Leases, net $ 8,000 $ 8,809 

 Maturities of lease liabilities as of January 2, 2022: 
 
 (in thousands) 
 Operating Leases Finance Leases Total 
 2022 $ 9,988 $ 2,583 $ 12,571 
 2023 8,472 2,106 10,578 
 2024 5,642 1,500 7,142 
 2025 4,404 1,007 5,411 
 2026 2,643 786 3,429 
 2027 and thereafter 3,566 743 4,309 
 Total undiscounted obligations (1) 
 34,715 8,725 43,440 
 Less imputed interest ( 2,337 ) ( 559 ) ( 2,895 ) 
 Present value of lease obligations (1) 
 $ 32,379 $ 8,166 $ 40,545 

 (1) Excludes lease undiscounted obligations for buildings which the Company has entered into but which have not commenced as of January 2, 2022, totaling $ 5.2 million. 
 
 103 

 The following table summarizes supplemental balance sheet information related to leases as of January 2, 2022: 
 
 (in thousands, except lease term and discount rate) Operating Leases Finance Leases 
 ROU asset, non-current (1) 
 $ 31,664 $ 8,000 
 
 Lease liability, current $ 9,152 $ 2,377 
 Lease liability, non-current 23,226 5,789 
 Total lease liabilities $ 32,379 $ 8,166 
 
 Weighted average remaining lease term (in years) 4.6 4.3 
 Weighted average discount rate 2.85 % 2.95 % 
 
 (1) Finance ROU assets are reflected within property, plant, and equipment, net on our consolidated balance sheets and operating leases ROU assets are reflected within other assets on our consolidated balance sheets. 
 
 The following table presents other information related to leases for the year ended January 2, 2022 (in thousands): 
 
 Year Ended January 2, 2022 
 Cash paid for amounts included in the measurement of lease liabilities: 
 Operating cash flows from operating leases $ 8,755 
 Operating cash flows from finance leases $ 254 
 Financing cash flows from finance leases $ 2,741 
 Leased assets obtained in exchange for new lease liabilities $ 13,569 

 17. WARRANTS 
 
 Prior to the Business Combination, CCH issued 15,833,332 warrants that were initially sold by CCH in its initial public offering of securities (the “Public Warrants”), including 1,166,666 warrants issued pursuant to those certain Forward Purchase Agreements entered into by CCH with the Sponsor and each of the independent directors of CCH (the “Forward Purchase Agreements”) that were issued at the Closing of the Business Combination as part of the Forward Purchase Agreement discussed below (the “Forward Purchase Warrants”), and 7,200,000 warrants initially sold to the Sponsor simultaneously with the closing of its initial public offering (the “Private Placement Warrants,” collectively, with the Public Warrants and Forward Purchase Warrants, the “Warrants”). As a result of the Business Combination, the Company assumed the CCH warrants and such warrants are now exercisable for shares of UBI Class A Common Stock instead of Class A ordinary shares of CCH. All other features of the warrants remain unchanged. On December 14, 2020, the Company provided notice to the holders of the Public Warrants and Forward Purchase Warrants that their warrants would be redeemed in accordance with the original terms on January 14, 2021. As of January 2, 2022, there were 7,200,000 Private Placement Warrants outstanding and all Public Warrants and Forward Purchase Warrants have been exercised (except for the Public Warrants that were redeemed by the Company on January 14, 2021). As of January 3, 2021, there were 4,575,645 Public Warrants, 432,000 Forward Purchase Warrants, and 7,200,000 Private Placement Warrants outstanding. Prior to January 3, 2021, 10,825,664 Public Warrants and Forward Purchase Warrants were exercised. 
 
 The Private Placement Warrants and the shares of Class A Common Stock issuable upon the exercise of the Private Placement Warrants were not transferable, assignable or salable until after the completion of the Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants are exercisable on a cashless basis, at the holder’s option, and are non-redeemable by the Company so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants. 
 104 

 We account for the Warrants as derivative liabilities in accordance with ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity (“ASC 815-40”), due to certain settlement provisions in the corresponding warrant agreement that do not meet the criteria to be classified in stockholders’ equity. Pursuant to ASC 815-40, the Warrants are now classified as a liability at fair value on the Company’s consolidated balance sheet, and the change in the fair value of such liability in each period is recognized as a non-cash gain or loss in the Company’s consolidated statements of operations and comprehensive income (loss). The Warrants are deemed equity instruments for income tax purposes, and accordingly, there is no tax accounting relating to changes in the fair value of the Warrants recognized. 
 
 The remeasurement of the warrant liability resulted in a gain (loss) of $ 36.7 million for the year ended January 2, 2022 and $( 91.9 ) million for the Successor period from August 29, 2020 to January 3, 2021. Such gain (loss) is not attributable to the noncontrolling interest. The Predecessor did not have warrants and as such no remeasurement of warrant liability is recorded for the predecessor period from June 29, 2020 to August 28, 2020 and the year ended December 29, 2019. 
 
 18. SIGNIFICANT CUSTOMERS 
 
 The following tables represents our net sales concentrations and accounts receivable concentration for our three largest customers by net sales. 
 
 Net sales concentrations: 
 
 Successor Predecessor 
 Customer Year Ended January 2, 2022 From 
August 29, 2020
through 
January 3, 2021 From 
December 30, 2019
through 
August 28, 2020 Year Ended December 29, 2019 
 Customer A 15 % 11 % 12 % 9 % 
 Customer B 7 5 4 5 
 Customer C 4 4 5 2 
 Total net sales concentrations 26 % 20 % 21 % 16 % 

 Accounts receivable concentrations: 
 
 Successor Predecessor 
 Customer As of
January 2, 2022 As of
January 3, 2021 As of December 29, 2019 
 Customer A 10 % 11 % 14 % 
 Customer B 6 5 5 
 Customer C 4 4 3 
 Total accounts receivable concentrations: 20 % 20 % 22 % 

 19. BUSINESS RISK 
 The novel coronavirus, or COVID-19, outbreak began impacting consumption, distribution and production of our products in March 2020. We have taken necessary preventive actions and implemented additional measures to protect our employees that work on site. We continue to experience higher demand for our products compared to historical volumes, and we are servicing that demand by increasing production and distribution activities. Generally, producers of food products, including salty snacks, have been deemed “essential industries” by federal, state, and local governments and are exempt from certain COVID-19-related restrictions on business operations. Our strategic manufacturing capabilities and DSD distribution network have allowed us to effectively service increases in demand and be responsive to evolving market dynamics driven by changes in consumer behavior. We continue to monitor customer and consumer demands, and intend to adapt our plans as needed to continue to meet these demands. 
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 20. EQUITY 
 
 Class A Common Stock 
 
 The Company is authorized to issue 1,000,000,000 shares of Class A Common Stock, par value $ 0.0001 per share, of which 77,644,645 and 71,094,714 shares of UBI were issued and outstanding on January 2, 2022 and January 3, 2021, respectively. Upon the Closing of the Business Combination, all shares of CCH Class A ordinary shares, including 3,500,000 Forward Purchase Class A Ordinary Shares of CCH that were issued at the Closing of the Business Combination as part of the Forward Purchase Agreement discussed below, and Class B ordinary shares, less shareholder redemptions, were converted on a one -for-one basis into shares of Class A Common Stock, including 2,000,000 shares of Class B Common Stock initially issued to the Sponsor, which immediately vested upon the Closing of the Business Combination and converted into shares of Class A Common Stock of the Company. 
 
 Class V Common Stock 
 
 The Company is also authorized to issue 61,249,000 shares of Class V Common Stock, par value of $ 0.0001 all of which were issued to the Continuing Members in connection with the Closing of the Business Combination, as described in Note 2. “Acquisitions”. Each of the Continuing Members' common limited liability company units of UBH along with a share of Class V Common Stock may be exchanged for one share of Class A Common Stock of the Company upon certain restrictions being satisfied, as described in Note 2. “Acquisitions”. As of January 2, 2022 and January 3, 2021, there were 59,349,000 and 60,349,000 , respectively, shares of Class V Common Stock outstanding. On September 21, 2021, the Continuing Members exchanged 1,000,000 Common Company Units together with the surrender and cancellation of the same number of Class V Common Stock for an equal number of shares of Class A Common Stock. The Company did not receive any proceeds as a result of this exchange. 
 
 Forward Purchases 
 
 In connection with the Closing of the Business Combination and pursuant to a Forward Purchase Agreement entered into between CCH, CCH’s Sponsor, and CCH’s independent directors, CCH consummated the sale and issuance of 3,500,000 shares issued pursuant to the Forward Purchase Agreements and Forward Purchase Warrants to acquire up to 1,166,666 Class A ordinary shares of CCH at $ 11.50 per share, for aggregate proceeds of $ 35,000,000 that were used to fund the Business Combination. 
 
 21. EARNINGS PER SHARE 
 
 Basic earnings per share is based on the weighted average number of shares of Class A Common Stock issued and outstanding during the Successor period. Diluted earnings per share is based on the weighted average number shares of Class A Common Stock issued and outstanding and the effect of all dilutive common stock equivalents and potentially dilutive share-based awards outstanding during the Successor period. For the Successor period, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Company's net loss position. The potentially dilutive securities that would be anti-dilutive due to the Company's net loss are not included in the calculation of diluted net loss per share attributable to controlling interest. The anti-dilutive securities are included in the table below. Refer to Note 11. "Share-Based Compensation" for further information on the share-based awards considered in the diluted EPS computation. 
 
 Given the historical partnership equity structure of UBH, the Company determined that the calculation of earnings per membership unit results in values that are not a valuable metric to users of these consolidated financial statements. Therefore, EPS information is omitted for the Predecessor periods. 
 
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 The following table reconciles the numerators and denominators used in the computations of both basic and diluted earnings per share: 
 
 Successor 
 (in thousands, except share data) Year Ended January 2, 2022 
 Basic earnings per share: 
 Numerator: 
 Net income attributable to controlling interest $ 20,555 
 Dividends and income related to participating stock-based compensation awards ( 386 ) 
 Net income attributable to common stockholders $ 20,169 
 Denominator: 
 Weighted average Class A Common Stock shares, basic 76,677,981 
 Basic earnings per share $ 0.26 
 Diluted earnings per share: 
 Numerator: 
 Net income attributable to common stockholders $ 20,555 
 Dividends and income related to participating stock-based compensation awards ( 386 ) 
 Net income attributable to common stockholders $ 20,169 
 Denominator: 
 Weighted average Class A Common Stock shares, basic 76,677,981 
 Dilutive securities included in diluted earnings per share calculation: 
 Warrants 3,316,122 
 RSUs 1,055,003 
 PSUs 32,256 
 Stock options 8,867 
 Total diluted weighted average shares 81,090,229 
 Diluted earnings per share $ 0.25 
 Class V Common Stock not subject to earnings per share calculation 60,063,286 
 Net loss attributable to noncontrolling interest $ ( 12,557 ) 

 107 

 Successor 
 (in thousands, except share data) From August 29, 2020 through January 3, 2021 
 Basic and diluted earnings per share: 
 Numerator: 
 Net loss attributable to controlling interest $ ( 99,930 ) 
 Dividends related to participating share-based compensation awards ( 110 ) 
 Net loss attributable to common stockholders $ ( 100,040 ) 
 Denominator: 
 Weighted average Class A Common Stock shares, basic and diluted 61,085,943 
 Basic and diluted earnings per share $ ( 1.64 ) 
 Anti-dilutive securities excluded from diluted earnings per share calculation: 
 Warrants 8,095,866 
 2020 LTIP RSUs 1,151,262 
 Initial grant RSUs 26,923 
 PSUs 140,076 
 Stock options 34,680 
 Total 9,448,807 
 Class V Common Stock not subject to earnings per share calculation 60,349,000 
 Net loss attributable to noncontrolling interest $ 7,971 

 The diluted earnings per share computation excludes the effect of certain RSUs granted to Directors and Management which convert to Class A Common Stock upon vesting 50 % at December 31, 2022 and 50 % at December 31, 2023, as their inclusion would have been anti-dilutive. 
 
 Shares of the Company’s Class V Common Stock do not participate in earnings or losses of the Company and, therefore, are not participating securities. The PSUs, Initial Grant RSUs, and 2020 LTIP RSUs were participating securities in the Successor period because the holders of these stock-based compensation awards are entitled to participate in dividends declared on Class A Common Stock, if and when declared, on a one-to-one per-share basis. As such, earnings per share calculations were completed under the two-class method. At January 2, 2022 and January 3, 2021, the Continuing Members held all 59,349,000 and 60,349,000 , respectively, shares of Class V Common Stock issued and outstanding and also held an equal number of common limited liability company units of UBH, which comprise the noncontrolling interest. The net loss attributable to the noncontrolling interest was $ 12.6 million and $ 8.0 million for the year ended January 2, 2022 and the Successor period from August 29, 2020 through January 3, 2021, respectively. 
 
 22. SUBSEQUENT EVENTS 
 On January 24, 2022, the Company announced that its subsidiaries have entered into a definitive agreement to acquire the assets of two existing third party direct store delivery distributors, Clem Snacks, Inc., a subsidiary of Clem Companies, and J&D Snacks, Inc., which together operate more than 125 DSD routes in the New York City, Long Island, Bronx and surrounding areas of New York. The Company closed on these transaction on February 7, 2022 and the acquisitions were funded with cash on hand as well as a draw on the ABL facility. 
 
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 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 
 
 None.
Utz Brands, Inc. 10-K

Item 8. Financial Statements and Supplementary Data
