What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-12 compared with 2021-11-12 · 193 added, 390 removed, 225 unchanged (72% of the section changed)

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited combined interim consolidated financial statements as of and for the thirteen and thirty-nine weeks ended October 3, 2021 (Successor), together with our audited combined consolidated financial statements for our most recently completed fiscal year set forth under Item 8 of our 2020 Annual Report.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited combined interim consolidated financial statements as of and for the thirteen weeks ended April 3, 2022, together with our audited combined consolidated financial statements for our most recently completed fiscal year set forth under Item 8 of our Annual Report on Form 10-K.

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

Our actual results could differ materially from those discussed below.

See “Cautionary Note Regarding Forward-Looking Statements” included in this Quarterly Report.

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

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

Our fiscal year 2020 ended January 3, 2021 and was a fifty-three-week period and our fiscal year 2021 will end January 2, 2022 and is a fifty-two-week fiscal year.

Our fiscal year 2021 ended January 2, 2022 and was a fifty-two-week period and our fiscal year 2022 will end January 1, 2023 and is a fifty-two-week fiscal year.

Our fiscal quarters are comprised of thirteen weeks each, except for fifty-three-week fiscal periods of which the fourth quarter is comprised of fourteen weeks, and end on the thirteenth Sunday of each quarter (fourteenth Sunday of the fourth quarter, when applicable).

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

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

We are a leading United States manufacturer of branded salty snacks.

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

Our iconic portfolio of authentic, craft, and "better for you" brands, which includes Utz®, ON THE BORDER® , Zapp’s®, Golden Flake®, Good Health®, Boulder Canyon®, Hawaiian® Brand, and TORTIYAHS!®, among others, enjoys strong household penetration in the United States, where our products can be found in approximately 49% of U.S.

We operate 15 manufacturing facilities with a broad range of capabilities, and our products are distributed nationally to grocery, mass merchant, club, convenience, drug and other retailers through direct shipments, distributors, and more than 1,800 direct-store-delivery (“DSD”) routes.

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

We operate 17 manufacturing facilities with a broad range of capabilities, and our products are distributed nationally to grocery, mass merchant, club, convenience, drug and other retailers through direct shipments, distributors, and approximately 2,000 direct-store-delivery ("DSD") routes.

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

We have historically expanded our geographic reach and product portfolio organically and through acquisitions.

Based on 2020 retail sales, we are the second-largest producer of branded salty snacks in our core geographies, where we have acquired strong regional brands and distribution capabilities in recent years.

Business Combination

On August 28, 2020, CCH domesticated into a Delaware corporation and changed its name to "Utz Brands, Inc." (the “Domestication”) and consummated the acquisition of certain limited liability company units of UBH, the parent of UQF, as a result of a new issuance by UBH and purchases from UBH’s existing equity holders pursuant to a Business Combination Agreement, dated as of June 5, 2020 (the “Business Combination Agreement”) among CCH, UBH and Series U of UM Partners, LLC (“Series U”) and Series R of UM Partners, LLC (“Series R” and together with Series U, the “Continuing Members”), following the approval at the extraordinary general meeting of the shareholders of CCH held on August 27, 2020.

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

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 of the Business Combination.

As a result of the Business Combination, UBI’s financial statement presentation distinguishes UBH as the “Predecessor” for periods prior to the closing of the Business Combination.

UBI, which includes consolidation of UBH subsequent to the Business Combination, is the “Successor” for periods after the closing of the Business Combination.

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.

Based on 2021 retail sales, we are the second-largest producer of branded salty snacks in our Core geographies.

We have historically expanded our geographic reach and product portfolio organically and through acquisitions.

Key Developments and Trends

Our management team monitors a number of developments and trends that could impact our revenue and profitability objectives.

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

Long-Term Demographics, Consumer Trends, and Demand – We participate in the attractive and growing $31 billion U.S.

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

The salty snacks category has grown retail sales at an approximately 6.9% compound annual growth rate (“CAGR”) over the last four years, including the increased in-home consumption of salty snacks due to COVID-19 during 2020.

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

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

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

population snacking daily and the average American snacking 2.7 times per day based upon the latest available IRI data.

snack foods as of January 2, 2022.

The salty snacks category has grown retail sales at an approximately 7.1% compound annual growth rate ("CAGR") from 2017 through 2021 with a major spike in 2020 driven by COVID-19 consumption.

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

Additionally, the salty snacks category has historically benefited from favorable competitive dynamics, including low private label penetration and category leaders competing primarily through marketing and innovation.

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

For the thirteen weeks ended October 3, 2021 (Successor), U.S.

For the thirteen weeks ended April 3, 2022, U.S.

retail sales for salty snacks based on IRI data increased by 13.4% versus the comparable prior year period.

In the same period, our retail sales increased by 4.4%.

salty snack category has grown at a 8.3% CAGR from June 30, 2019 to July 4, 2021, while the Company has grown at a 9.5% CAGR over the same time period.

In the same period, our retail sales increased 18.1%.

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

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We believe we compete effectively with respect to each of these factors.

Operating Costs – Our operating costs include raw materials, labor, manufacturing overhead, selling, distribution, general and administrative expenses.

Operating Costs – Our operating costs include raw materials, labor, manufacturing overhead, selling, distribution, and administrative expenses.

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

Additionally, we maintain ongoing efforts led by our project management office, to expand our profitability, including implementing significant reductions to our operating cost structure in both supply chain and overhead costs.

Additionally, we maintain ongoing efforts led by our project management office, or PMO, to expand our profitability, including implementing significant reductions to our operating cost structure in both supply chain and overhead costs.

Taxes – On March 27, 2020, The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was enacted which includes various tax provisions with retroactive effect.

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

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

The first installment occurred in September 2021.

The deferred payroll taxes must be deposited in two installments, with the first installment of $3.9 million paid as of December 31, 2021, and the remaining $3.9 million due on December 31, 2022.

We continue to evaluate the impact of the CARES Act;

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We continue to use low-cost, short- and long-term debt to finance our ongoing working capital, capital expenditures and other investments and dividends.

Our weighted average interest rate for the thirty-nine weeks ended October 3, 2021 (Successor) was 3.5%, down from 4.7% during the thirty-nine weeks ended September 27, 2020 (Successor and Predecessor).

Our weighted average interest rate for the thirteen weeks ended April 3, 2022 was 3.9%, up from 3.7% during the thirteen weeks ended April 4, 2021.

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

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"Long-Term Debt" and Note 9.

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

LIBOR Transition – As of October 3, 2021, we had $789.1 million in variable rate indebtedness, up from $780.0 million at January 3, 2021.

As of October 3, 2021 our variable rate indebtedness is tied to the Eurocurrency Rate which currently uses the London Inter Bank Offered Rate ("LIBOR") as a benchmark for establishing applicable rates.

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

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

LIBOR Transition – As of April 3, 2022, we had $841.2 million in variable rate indebtedness, up from $823.2 million at January 2, 2022.

As of April 3, 2022 our variable rate indebtedness is tied to the Eurocurreny Rate which currently uses the London Inter Bank Offered Rate ("LIBOR") as a benchmark for establishing applicable rates.

As of April 3, 2022, we have entered into interest rate hedges covering $500.0 million of debt through September 30, 2026, which limits some of our exposure to changes in interest rates.

"Derivatives Financial Instruments and Purchase Commitments" for additional details.

On November 30, 2020, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of Currency and the Federal Deposit Insurance Corporation issued a public statement that the administrator of LIBOR announced it will consult on an extension of publication of certain U.S.

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

During this time we picked up a significant number of new customers and have experienced a high level of repeat customers within fiscal year 2021 and the first quarter of 2022.

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

Recent Developments and Significant Items Affecting Comparability

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

related to the H.K.

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

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

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 the two acquisitions are 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 asset purchase and is treated as an indefinite lived intangible assets.

On February 8, 2021, the Company closed on a definitive agreement with Snak-King Corp.

to acquire certain assets of the C.J.

Vitner's business, a leading brand of salty snacks in the Chicago, IL area.

Vitner's business, ("Vitner's acquisition" or "acquisition of Vitner's"), a leading brand of salty snacks in the Chicago, IL area.

The acquisition increases our distribution in the Chicago area and Midwest Region and expands our product offering.

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

On June 7, 2021, the Company closed on a definitive agreement with Great Lakes Festida Holdings, Inc.

to acquire all assets including real estate located in Grand Rapids, Michigan related to the operations of Festida Foods a manufacturer of tortilla chips, corn chips, and pellet snacks, and the largest manufacturer of tortilla chips for the Company's ON THE BORDER® brand.

The Company paid the purchase price of approximately $40.3 million which was funded in part from incremental financing on an existing term loan.

Commodity Trends and Labor and Transportation Costs

On May 10, 2021, the Company announced that its subsidiary, UQF, entered into a definitive agreement with Great Lakes Festida Holdings, Inc.

to acquire all assets including real estate located in Grand Rapids, Michigan related to the operations of Festida Foods ("Festida Foods acquisition" or "acquisition of Festida Foods"), a manufacturer of tortilla chips, corn chips, and pellet snacks, and the largest manufacturer of tortilla chips for the Company's ON THE BORDER® brand.

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

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

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

Garcia Co., Inc.

("RW Garcia") to acquire the equity of RW Garcia., an artisan maker of high-quality organic tortilla chips, crackers, and corn chips ("RW Garcia acquisition").

The Company closed on this transaction on December 6, 2021, with the purchase price of approximately $57.8 million funded in part from a draw on the Company's line of credit and cash on hand.

In addition to this acquisition on December 6, 2021, the Company closed on an acquisition of a manufacturing facility of which RW Garcia was a tenant.

The cost of the manufacturing facility was approximately $6.0 million.

Commodity Trends

We regularly monitor worldwide supply and commodity costs so we can cost-effectively secure ingredients, packaging and fuel required for production.

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We address commodity costs primarily through the use of buying-forward, which locks in pricing for key materials between three and 18 months in advance.

Other methods include hedging, net pricing adjustments, and manufacturing and overhead cost control.

Other methods include hedging, net pricing adjustments to cover longer term cost inflation, and manufacturing and overhead cost control.

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

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

We expect this trend to continue through early 2022 and may adversely impact our net income.

Toward the end of 2020, we began to experience an increase in pricing in certain commodity trends that continued to rise throughout fiscal year 2021 and have continued to rise in Q1 2022.

We expect this trend to continue through 2022 and this may adversely impact our net income.

Additionally, the Company has experienced rising costs related to fuel and freight rates as well as rising labor costs which have negatively impacted profitability.

Transportation costs have been on the rise for the last few months and may continue to rise which may adversely impact net income.

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

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

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

Transportation costs have been on the rise since early 2021 and may continue to rise which may also adversely impact net income.

Taken all together, the Company now expects gross input cost inflation (which includes commodities, labor, and transportation) to be in the mid-teens in fiscal 2022, which is an increase from its previous expectation of low-teens.The Company looks to offset rising costs through increasing manufacturing and distribution efficiencies as well as through price increases to our customers, although it is unclear whether historic customer sales levels will be maintained at these higher prices.

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

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

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

Independent Operator Conversions

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In fiscal year 2017, we embarked on a multi-year strategy to convert all company owned RSP routes to the IO model.

The mix between IOs and RSP was approximately 85% and 15%, respectively as of October 3, 2021 versus 78% and 22% ratio for IOs and RSPs respectively as of September 27, 2020.

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

The conversion process involves selling distribution rights to a defined route to an IO.

The mix between IOs and RSP was approximately 89% and 11%, respectively as of April 3, 2022 versus 81% and 19% ratio for IOs and RSPs respectively as of April 4, 2021.

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

The conversion process involves selling distribution rights of a defined route to an IO.

As we convert a large number of routes in a year, there is a meaningful decrease in the selling and administrative costs that we previously incurred on RSPs and a corresponding increase in discounts paid to IOs to cover their costs to distribute our product.

The net impact is a reduction in Selling expenses and a decrease in Net Sales and Gross Profit.

The net impact is a reduction in selling and distribution expenses and a decrease in Net Sales and Gross Profit.

Conversions also impact our balance sheet resulting in cash proceeds to us as a result of selling the route to an IO, or by creating notes receivable related to the sale of the routes.

Results of Operations

The following table presents selected unaudited financial data for the thirteen weeks ended October 3, 2021 (Successor) and the Successor period from August 29, 2020 through September 27, 2020 and the Predecessor periods from June 29, 2020 through August 28, 2020 as well as the combined Predecessor period from June 29, 2020 through August 28, 2020 with the Successor period from August 29, 2020 through September 27, 2020.

Additionally, we have presented the thirty-nine weeks ended October 3, 2021 (Successor) and the Predecessor period from December 30, 2019 through August 28, 2020 and the combined Predecessor period from December 30, 2019 through August 28, 2020 with the Successor period from August 29, 2020 through September 27, 2020.

We have prepared our discussion of the results of operations by comparing the thirteen weeks ended October 3, 2021 (Successor) with the results of the combined Successor period from August 29, 2020 through September 27, 2020 and Predecessor period from June 29, 2020 through August 28, 2020.

Additionally, we compared the results of the thirty-nine weeks ended October 3, 2021 (Successor) with the combined Successor period from August 29, 2020 through September 27, 2020 and Predecessor period from December 30, 2019 through August 28, 2020.

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

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

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

Successor Predecessor

Thirteen weeks ended October 3, 2021 Thirty-nine weeks ended October 3, 2021 From

August 29, 2020

September 27, 2020 From

June 29, 2020

August 28, 2020 From

December 30, 2019

August 28, 2020

Net sales $ 312,680 $ 879,781 $ 79,372 $ 168,656 $ 638,662

Cost of goods sold 210,053 586,353 55,305 106,484 411,595

Gross profit 102,627 293,428 24,067 62,172 227,067

Selling, general and administrative expenses

Selling 67,985 189,152 16,859 33,648 131,579

General and administrative 30,724 89,698 8,451 25,626 64,050

Total selling, general and administrative expenses 98,709 278,850 25,310 59,274 195,629

Gain on sale of assets

Gain (loss) on disposal of property, plant and equipment, net 60 964 5 (14) 79

(Loss) gain on sale of routes, net (1,103) 1,001 59 233 1,264

Total (loss) gain on sale of assets (1,043) 1,965 64 219 1,343

Income (loss) from operations 2,875 16,543 (1,179) 3,117 32,781

Other income (expense)

Interest expense (7,726) (26,483) (1,818) (7,029) (26,659)

Other income (expense) 740 2,216 (2,323) 432 1,271

Gain (loss) on remeasurement of warrant liability 36,288 34,155 (18,008) — —

Other income (expense), net 29,302 9,888 (22,149) (6,597) (25,388)

Income (loss) before income tax expense 32,177 26,431 (23,328) (3,480) 7,393

Income tax expense (benefit) 827 2,251 (2,889) 1,344 3,973

Net income (loss) 31,350 24,180 (20,439) (4,824) 3,420

Net loss attributable to noncontrolling interest 1,902 4,122 2,320 — —

Net income (loss) attributable to controlling interest $ 33,252 $ 28,302 $ (18,119) $ (4,824) $ 3,420

Successor Predecessor Non-GAAP Combined

August 29, 2020

September 27, 2020 From

June 29, 2020

August 28, 2020 Thirteen weeks ended September 27, 2020

The following tables present selected unaudited financial data for the thirteen weeks ended April 3, 2022 and April 4, 2021.

(in thousands) Thirteen weeks ended April 3, 2022 Thirteen weeks ended April 4, 2021

Net sales $ 340,767 $ 269,182

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Gross profit 103,807 95,241

Selling, general and administrative expenses

Selling 16,859 33,648 50,507

General and administrative 8,451 25,626 34,077

Total selling, general and administrative expenses 25,310 59,274 84,584

Selling, distribution, and administrative expenses

Selling and distribution 88,110 56,728

Administrative 38,551 29,933

Total selling, distribution, and administrative expenses 126,661 86,661

Gain on sale of assets 367 719

Gain (loss) on disposal of property, plant and equipment, net 5 (14) (9)

Gain on sale of routes, net 59 233 292

Total gain on sale of assets 64 219 283

(Loss) income from operations (22,487) 9,299

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Interest expense (9,103) (10,861)

Other (expense) income (2,323) 432 (1,891)

Loss on remeasurement of warrant liability (18,008) — (18,008)

Other income 520 718

Gain (loss) on remeasurement of warrant liability 1,944 (21,501)

Other (expense) income, net (6,639) (31,644)

Loss before income tax expense (23,328) (3,480) (26,808)

Loss before taxes (29,126) (22,345)

Income tax (benefit) expense 2,772 1,004

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Net loss attributable to controlling interest $ (17,570) $ (22,529)

Successor Predecessor Non-GAAP Combined

August 29, 2020

September 27, 2020 From

December 30, 2019

August 28, 2020 Thirty-nine weeks ended September 27, 2020

Net sales $ 79,372 $ 638,662 $ 718,034

Cost of goods sold 55,305 411,595 466,900

Gross profit 24,067 227,067 251,134

Selling, general and administrative expenses

Selling 16,859 131,579 148,438

General and administrative 8,451 64,050 72,501

Total selling, general and administrative expenses 25,310 195,629 220,939

Gain on sale of assets

Gain on disposal of property, plant and equipment, net 5 79 84

Gain on sale of routes, net 59 1,264 1,323

Total gain on sale of assets 64 1,343 1,407

(Loss) income from operations (1,179) 32,781 31,602

Other (expense) income

Interest expense (1,818) (26,659) (28,477)

Other (expense) income (2,323) 1,271 (1,052)

Loss on remeasurement of warrant liability (18,008) — (18,008)

Other (expense) income, net (22,149) (25,388) (47,537)

(Loss) income before income tax expense (23,328) 7,393 (15,935)

Income tax (benefit) expense (2,889) 3,973 1,084

Net (loss) income (20,439) 3,420 (17,019)

Net loss attributable to noncontrolling interest 2,320 — 2,320

Net (loss) income attributable to controlling interest $ (18,119) $ 3,420 $ (14,699)

Thirteen weeks ended October 3, 2021 (Successor) versus thirteen weeks ended September 27, 2020 (Combined)

Net sales were $312.7 million, $79.4 million, and $168.7 million for the thirteen weeks ended October 3, 2021 (Successor), for the successor period August 29, 2020 through September 27, 2020 and the predecessor period June 29, 2020 through August 28, 2020, respectively.

Net sales for the thirteen weeks ended October 3, 2021 (Successor) increased $64.7 million or 26.1% over the comparable period in 2020.

The increase in net sales for the thirteen weeks ended October 3, 2021 (Successor) was primarily related to sales attributable to the acquisitions of Truco, Vitner's, H.K.

Anderson, and Festida Foods.

IO discounts increased to $31.6 million for the thirteen weeks ended October 3, 2021 (Successor) from $25.2 million for the comparable period in 2020.

Excluding the impacts of acquisitions and changes to IO discounts due to RSP to IO conversion, total net sales increased 2.0% for the thirteen weeks ended October 3, 2021 (Successor) versus the corresponding period in 2020 primarily driven by pricing actions to help offset inflationary pressures on raw materials and higher supply chain costs.

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

Power Brands (“Power Brands”) include our iconic heritage Utz brand and iconic ON THE BORDER® brand;

Thirteen weeks ended April 3, 2022 versus thirteen weeks ended April 4, 2021

Net sales was $340.8 million and $269.2 million for the thirteen weeks ended April 3, 2022 and April 4, 2021, respectively.

Net sales for the thirteen weeks ended April 3, 2022 increased $71.6 million or 26.6% over the comparable period in 2021.

The increase in net sales for the thirteen weeks ended April 3, 2022 was primarily related to the acquisitions of Vitner's, Festida Foods, and R.W.

Garcia as well as favorable price/mix of 9.4%, which was largely driven by pricing action in the second half of 2021 and during the first quarter of 2022 as a response to inflationary pressures, as well as organic volume growth.

IO discounts increased to $34.2 million for the thirteen weeks ended April 3, 2022 from $26.5 million for the corresponding thirteen weeks ended April 4, 2021.

Excluding the impacts of acquisitions and increased IO discounts related to RSP to IO conversion, organic net sales increased 20.7% for the thirteen weeks ended April 3, 2022 versus the corresponding period in 2021.

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

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

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

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

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

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

For the thirteen weeks ended October 3, 2021 (Successor), excluding brands acquired through our H.K.

Anderson, Festida Foods, Truco, and Vitner's acquisitions, Power Brand sales increased by approximately 4.1%, while Foundation Brand sales decreased approximately 3.1% from the comparable period in 2020.

The decline in net sales for Foundation Brands is due to planned reductions in private label volume and lapping higher sales driven by changes in consumer behavior as a result of COVID-19 in the prior year.

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

Cost of goods sold and Gross profit

Gross profit was $102.6 million, $24.1 million and $62.2 million for the thirteen weeks ended October 3, 2021 (Successor), for the successor period August 29, 2020 through September 27, 2020 and the predecessor period June 29, 2020 through August 28, 2020, respectively.

The increase in gross profit for thirteen weeks ended October 3, 2021 (Successor) was driven by higher sales resulting from the acquisitions of Truco, Festida Foods, Vitner's, and H.K.

Anderson, along with pricing actions necessary to help offset higher commodity, wage, and supply chain costs due to inflationary pressure.

Our gross profit margin was 32.8% for the thirteen weeks ended October 3, 2021 (Successor) versus 34.8% for the comparable period in 2020.

The decrease in gross profit margin was primarily driven by higher commodity, labor, and inbound freight costs offset by pricing actions and year over year productivity gains.

Additionally, IO discounts increased to $31.6 million for the thirteen weeks ended October 3, 2021 (Successor) from $25.2 million for the comparable period in 2020, reducing gross profit by $6.4 million.

The increase to IO discounts was primarily attributable to the planned transition from Company owned DSD routes to independent operators, which was offset by a reduction of our selling, general, and administrative expense structure.

Selling, general and administrative expense

Selling, general and administrative expenses increased to $98.7 million, up $14.1 million or 16.7%, for the thirteen weeks ended October 3, 2021 (Successor) from $84.6 million for the comparable period in 2020.

The increased expenses for the thirteen weeks ended October 3, 2021 (Successor) were primarily driven by incremental operating costs associated with acquisitions and being a public company, totaling $10.4 million, along with incremental depreciation and amortization of $3.2 million associated with the Business Combination.

Other factors driving increased year-over-year cost include industry-wide inflationary pressures in transportation and fuel costs of $4.2 million, offset by savings due to the transition of Company owned DSD routes to independent operators and lower incentive based compensation.

Gain on sale of assets

Gain on sale of assets was $(1.0) million, $0.1 million and $0.2 million for the thirteen weeks ended October 3, 2021 (Successor), for the successor period August 29, 2020 through September 27, 2020 and the predecessor period June 29, 2020 through August 28, 2020, respectively.

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

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

Other income (expense), net

Other income (expense), net was $29.3 million, $(22.1) million, and $(6.6) million for the thirteen weeks ended October 3, 2021 (Successor), for the successor period August 29, 2020 through September 27, 2020 and the predecessor period June 29, 2020 through August 28, 2020, respectively .

The increase in income for the thirteen weeks ended October 3, 2021 (Successor) was primarily due to a $36.3 million gain from the remeasurement of the warrant liability compared to a $18.0 million loss for the successor period August 29, 2020 through September 27, 2020.

Inco me tax expense (benefit) was $0.8 million, $(2.9) million and $1.3 million for the thirteen weeks ended October 3, 2021 (Successor), for the successor period August 29, 2020 through September 27, 2020 and the predecessor period June 29, 2020 through August 28, 2020, respectively .

Thirty-nine weeks ended October 3, 2021 (Successor) versus thirty-nine week periods ended September 27, 2020 (Combined)

Net sales were $879.8 million, $79.4 million and $638.7 million for the thirty-nine weeks ended October 3, 2021 (Successor), for the successor period August 29, 2020 through September 27, 2020 and the predecessor period December 30, 2019 through August 28, 2020, respectively .

Net sales for the thirty-nine weeks ended October 3, 2021 (Successor) increased $161.7 million or 22.5% over the comparable period in 2020.

The increase in net sales for the thirty-nine weeks ended October 3, 2021 (Successor) was primarily related to the acquisitions of Truco, Vitner's, H.K.

Anderson, and Festida Foods.

The thirty-nine weeks ended September 27, 2020 (Combined) experienced increased sales across customers and geographies that were heightened by increased in-home consumption of salty snacks due to COVID-19.

IO discounts increased to $88.6 million for the thirty-nine weeks ended October 3, 2021 (Successor) from $73.0 million for the comparable period in 2020.

Excluding the impacts of acquisitions and changes to IO discounts due to RSP to IO conversions, total net sales declined 0.7% for the thirty-nine weeks ended October 3, 2021 (Successor) versus the corresponding period in 2020 driven by lapping prior period incremental COVID-19 volume and impacts of supply chain disruptions in 2021.

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

Power brands include our iconic heritage Utz brand;

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

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

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

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

For the thirty-nine weeks ended October 3, 2021 (Successor), excluding brands acquired through our H.K.

Anderson, Truco, Festida Foods, and Vitner's acquisitions, Power Brand sales increased by approximately 1.0%, while Foundation Brand sales decreased approximately 3.8% over the comparable period in 2020.

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

and selected licensed brands such as TGI Fridays ®.

Our Foundation brands are comprised of several regional brands, including Bachman ®, Golden Flake ® Chips and Cheese, Tim’s Cascade ® Snacks , Snyder of Berlin ®, and " Dirty" Potato Chips®, R.W.

Garcia® and selected licensed brands such as Herdez ® as well as other partner and private label brands.

For the thirteen weeks ended April 3, 2022, excluding brands acquired through our Vitner's, Festida Foods, and R.

Garcia acquisitions, Power brand sales increased by approximately 27.7%, while Foundation brand sales increased approximately 6.8% from the thirteen weeks ended April 4, 2021.

The increase in Power brand sales is due primarily to favorable pricing action as well as the buyout and termination of the contracts of multiple distributors which resulted in higher net sales to our customers, and increased sales volume, offset by continued IO conversions.

Foundation brand sales increase was primarily driven by increased pricing offset by continued IO conversion.

Cost of goods sold and Gross profit

Gross profit was $293.4 million, $24.1 million, and $227.1 million for the thirty-nine weeks ended October 3, 2021 (Successor), for the successor period August 29, 2020 through September 27, 2020 and the predecessor period December 30, 2019 through August 28, 2020, respectively.

The increase in gross profit for thirty-nine weeks ended October 3, 2021 (Successor) was primarily driven by higher sales resulting from the acquisitions of Truco, Festida Foods, Vitner's, and H.K.

Anderson, along with pricing actions necessary to help offset higher commodity, wage, and supply chain costs due to inflationary pressure.

Our gross profit margin was 33.4% for the thirty-nine weeks ended October 3, 2021 (Successor) versus 35.0% over the comparable period in 2020.

The decrease in gross profit margin was primarily driven by higher commodity, labor, and inbound freight costs due to industry wide inflationary pressures, somewhat offset by gains from pricing actions and benefits from year over year productivity programs.

Additionally, IO discounts increased to $88.6 million for the thirty-nine weeks ended October 3, 2021 (Successor) from $73.0 million for the comparable period in 2020, reducing gross profit by $15.6 million.

Selling, general and administrative expense

Selling, general and administrative expenses were $278.9 million, $25.3 million and $195.6 million for the thirty-nine weeks ended October 3, 2021 (Successor), for the successor period August 29, 2020 through September 27, 2020 and the predecessor period December 30, 2019 through August 28, 2020, respectively .

Selling, general and administrative expenses for the thirty-nine weeks ended October 3, 2021 (Successor) increased $57.9 million or 26.2% over the corresponding period in 2020.

The increased expenses for the thirty-nine weeks ended October 3, 2021 (Successor) were primarily driven by incremental operating costs associated with acquisitions and being a public company totaling $39.3 million, along with the associated depreciation and amortization of $10.6 million associated with the Business Combination.

Other factors driving increased year-over-year cost include industry-wide inflationary pressures in transportation and fuel costs of $10.6 million, increased spend for marketing/media of $4.7 million, to drive future growth, offset by savings due to the transition of Company owned DSD routes to independent operators and lower incentive based compensation.

Gain on sale of assets

Gain on sale of assets was $2.0 million, $0.1 million, and $1.3 million for the thirty-nine weeks ended October 3, 2021 (Successor), for the successor period August 29, 2020 through September 27, 2020 and the predecessor period December 30, 2019 through August 28, 2020, respectively .

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

Conversion continued during the first three quarters of 2021 and gains were offset by the values of the routes that were established as part of the Business Combination.

Other income (expense), net

Other income (expense), net was $9.9 million, $(22.1) million and $(25.4) million for the thirty-nine weeks ended October 3, 2021 (Successor), for the successor period August 29, 2020 through September 27, 2020 and the predecessor period December 30, 2019 through August 28, 2020, respectively .

The incremental income for the thirty-nine weeks ended October 3, 2021 (Successor) was primarily due to a $34.2 million gain from the remeasurement of the warrant liability, compared to a loss of $18.0 million from the remeasurement of the warrant liability for the successor period August 29, 2020 through September 27, 2020.

The other primary driver of the change in other income (expense) was related to interest expense which was down slightly from the comparable period.

Inco me tax expense (benefit) was $2.3 million, $(2.9) million and $4.0 million for the thirty-nine weeks ended October 3, 2021 (Successor), for the successor period August 29, 2020 through September 27, 2020 and the predecessor period December 30, 2019 through August 28, 2020, respectively .

EBITDA, Adjusted EBITDA, and Further Adjusted EBITDA

Gross profit was $103.8 million and $95.2 million for the thirteen weeks ended April 3, 2022 and April 4, 2021, respectively.

The increase in gross profit for thirteen weeks ended April 3, 2022 was driven by organic volume growth, the gross profit contributions related to the acquisition of Vitner's, Festida Foods, and R.W.

Garcia, and the benefits of leveraging our existing infrastructure and available capacity while also improving efficiencies through productivity initiatives.

In addition, pricing initiatives were put in place to help reduce the impact of continued commodity, transportation, and wage inflation.

Our gross profit margin was 30.5% for the thirteen weeks ended April 3, 2022 versus 35.4% for the thirteen weeks ended April 4, 2021.

The decline in gross profit margin was primarily driven by commodity and wage inflation that outpaced pricing actions.

Additionally, IO discounts increased to $34.2 million for the thirteen weeks ended April 4, 2021 from $26.5 million for the thirteen weeks ended April 3, 2022, reducing gross profit by $7.7 million, or 2.3%.

The increase in IO discounts was driven by increased sales due to volume growth, pricing actions, and continued conversions of DSD routes from RSP to IO.

Selling, distribution, and administrative expense

Selling, distribution, and administrative expenses were $126.7 million and $86.7 million for the thirteen weeks ended April 3, 2022 and April 4, 2021, respectively resulting in an increase of $40.0 million or 46.2% over the corresponding period in fiscal year 2021.

The increase in expenses for the thirteen weeks ended April 3, 2022 was driven by higher Acquisition and Integration costs related to the buyout of multiple distributors, which were accounted for as contract terminations, and resulted in expense of $23.0 million.

In addition, other contract termination expense and related impairments totaled a combined $2.6 million.

Excluding these items selling, distribution, and administrative expenses increased by 16.6% for the thirteen weeks ended April 3, 2022 compared to the corresponding period in fiscal year 2021.

We believe that these actions will help drive increased future profitability and allow us to better serve our customers.

Other significant contributors to the increase in expense can be attributed to higher delivery costs by $4.9 million and the addition of operational costs related to the acquired operations Vitner's, Festida, and R.W.

Garcia businesses.

These incremental costs were offset by the reductions of selling costs related to the continued conversion out of Company owned RSP to IO routes.

Gain (loss) on sale of assets

Gain on sale of assets was $0.4 million and $0.7 million for the thirteen weeks ended April 3, 2022 and April 4, 2021, respectivel y.

Th e Company has continued to convert company owned routes to IO routes during the first fiscal quarter of 2022, offsetting the sales price by the respective route intangible asset.

Other (expense) income, net

Other expense, net was $6.6 million and $31.6 million for the thirteen weeks ended April 3, 2022 and April 4, 2021, respectively.

The decrease in expense for the thirteen weeks ended April 3, 2022 was primarily due to a $1.9 million gain from the remeasurement of warrant liability for the thirteen weeks ended April 3, 2022 versus a loss of $21.5 million for the thirteen weeks ended April 4, 2021.

Also significant was interest expense of $9.1 million for the thirteen weeks ended April 3, 2022 compared to $10.9 million for the thirteen weeks ended April 4, 2021.

Inco me tax expense was $2.8 million and $1.0 million for the thirteen weeks ended April 3, 2022 and April 4, 2021, respectively.

EBITDA and Adjusted EBITDA

We define EBITDA as Net Income before Interest, Income Taxes, and Depreciation and Amortization.

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and Financing-Related Costs.

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

Anderson, pre-acquisition EBITDA of Festida.

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

Adjusted EBITDA is one of the key performance indicators we use in evaluating our operating performance and in making financial, operating, and planning decisions.

We believe EBITDA, Adjusted EBITDA, and Further Adjusted EBITDA are useful to investors in the evaluation of Utz’s operating performance compared to other companies in the salty snack industry, as similar measures are commonly used by companies in this industry.

We believe EBITDA and Adjusted EBITDA are useful to investors in the evaluation of Utz’s operating performance compared to other companies in the salty snack industry, as similar measures are commonly used by companies in this industry.

We have also historically reported an Adjusted EBITDA metric to investors and banks for covenant compliance.

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

The following tables provides a reconciliation from Net (Loss) Income for the Successor period from August 29,2020 through September 27,2020 and the predecessor periods from June 29, 2020 through August 28, 2020 and December 30, 2019 through August 28, 2020 to the thirteen and thirty-nine weeks ended September 27, 2020 (Combined), respectively:

Successor Predecessor Combined

(dollars in millions) From

August 29, 2020

September 27, 2020 From

June 29, 2020

August 28, 2020 Thirteen weeks ended September 27, 2020

The following table provides a reconciliation from Net Loss to EBITDA and Adjusted EBITDA for the thirteen weeks ended April 3, 2022 and April 4, 2021:

(dollars in millions) Thirteen weeks ended April 3, 2022 Thirteen weeks ended April 4, 2021

Net loss $ (31.9) $ (23.3)

Successor Predecessor Combined

(dollars in millions) From

August 29, 2020

September 27, 2020 From

December 30, 2019

August 28, 2020 Thirty-nine weeks ended September 27, 2020

Net (Loss) Income $ (20.4) $ 3.4 $ (17.0)

The following tables provides a reconciliation from Net Income (Loss) to EBITDA and Adjusted EBITDA for the thirteen and thirty-nine weeks ended October 3, 2021 (Successor) and September 27, 2020 (Combined), respectively:

Successor Combined

(dollars in millions) Thirteen weeks ended October 3, 2021 Thirteen weeks ended September 27, 2020

Net Income (Loss) $ 31.4 $ (25.3)

Plus non-GAAP adjustments:

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Adjusted EBITDA as a % of Net Sales 10.7 % 14.1 %

HKA Pre-Acquisition Adjusted EBITDA (7)

Vitner's Pre-Acquisition Adjusted EBITDA (7)

Truco Pre-Acquisition Adjusted EBITDA (7)

Festida Pre-Acquisition Adjusted EBITDA (7)

Further Adjusted EBITDA $ 44.8 $ 53.6

Successor Combined

(dollars in millions) Thirty-nine weeks ended October 3, 2021 Thirty-nine weeks ended September 27, 2020

Net Income (Loss) $ 24.2 $ (17.0)

Plus non-GAAP adjustments:

Income Tax Expense 2.3 1.1

Depreciation and Amortization 59.3 35.4

Interest Expense, Net 26.5 28.5

Interest Income (IO loans) (1)

EBITDA 110.3 46.2

Certain Non-Cash Adjustments (2)

Acquisition and Integration (3)

Business Transformation Initiatives (4)

Financing-Related Costs (5)

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

Adjusted EBITDA 118.5 100.0

Adjusted EBITDA as a % of Net Sales 13.5% 13.9%

HKA Pre-Acquisition Adjusted EBITDA (7)

Vitner's Pre-Acquisition Adjusted EBITDA (7)

Truco Pre-Acquisition Adjusted EBITDA (7)

Festida Pre-Acquisition Adjusted EBITDA (7)

Further Adjusted EBITDA $ 121.1 $ 145.9

(1) Interest Income from IO Loans refers to Interest Income that we earn from IO notes receivable that have resulted from our initiatives to transition from RSP distribution to IO distribution ("Business Transformation Initiatives") .

There is a Notes Payable recorded that mirrors the IO notes receivable, and the interest expense associated with the Notes Payable is part of the Interest Expense, Net adjustment.

There is a Notes

Payable recorded that mirrors most of the IO notes receivable, and the interest expense associated with the Notes Payable is part of the Interest Expense, Net adjustment.

(2) Certain Non-Cash Adjustments are comprised primarily of the following:

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

The Company recorded income of $4.1 million and $2.2 million for thirteen weeks and thirty-nine weeks ended September 27, 2020 (Combined), respectively.

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

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

For the thirteen weeks and thirty-nine weeks ended October 3, 2021 (Successor), the Company incurred $2.1 million and $7.8 million, respectively, of stock-based compensation under the 2020 LTIP.

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

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

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

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

(ii) integration and restructuring costs related to recently completed acquisitions, which include Vitner's, Truco, H.K.

Anderson, Festida Foods, and other acquisitions;

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

(4) Business Transformation Initiatives Adjustment – This adjustment is related to consultancy and professional fees incurred for specific initiatives and structural changes to the business that do not reflect the cost of normal business operations.

In addition, certain historical Rice/Lissette family-related costs incurred but not part of normal business operations prior to the Business Combination;

ERP conversion and transition costs;

costs incurred related to the conversion of company-owned independent operator routes (including gains or losses on the sale of routes and severance associated with the elimination of RSP positions);

and restructuring and business optimization costs, fall into this category.

Incentive programs – For the thirteen weeks ended April 3, 2022 and April 4, 2021, the Company incurred $1.4 million and $2.9 million, respectively, of share based compensation and employee stock purchase plan.

During the thirteen weeks ended April 3, 2022, the Company recorded an impairment of $2.0 million related to the termination of distribution agreements.

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

The majority of charges are related to the buyout of multiple distributors, which was accounted for as a contract termination resulting in expense of $23.0 million for the thirteen weeks ended April 3, 2022, versus the costs incurred for the Vitner's acquisition, the Truco acquisition, and related integration expenditures where we incurred costs of $1.9 million for the thirteen weeks ended April 4, 2021.

(4) Business Transformation Initiatives Adjustment – This adjustment is related to consultancy, professional, and legal fees incurred for specific initiatives and structural changes to the business that do not reflect the cost of normal business operations.

In addition, gains realized from the sale of distribution rights to IOs and the subsequent disposal of trucks, and ERP transition costs, offset by severance costs associated with the elimination of RSP positions, fall into this category.

The Company incurred such costs of $4.4 million and $3.3 million for the thirteen weeks ended April 3, 2022 and April 4, 2021, respectively.

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

The Company incurred expenses of $0.1 million and $0.7 million for the thirteen weeks and thirty-nine weeks ended October 3, 2021 (Successor), compared to $2.5 million and $2.6 million for the thirteen weeks and thirty-nine weeks ended September 27, 2020 (Combined), respectively.

(6) Losses (or gains) related to the changes in the remeasurement of warrant liabilities are not expected to be settled in cash, and when exercised would result in a cash inflow to the Company with the Warrants converting to Class A Common Stock with the liability being extinguished and the fair value of the Warrants at the time of exercise being recorded as an increase to equity.

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

The Company incurred expenses of $0.3 million for the thirteen weeks ended April 3, 2022.

(6) Gains and losses related to the changes in the remeasurement of warrant liabilities are not expected to be settled in cash, and when exercised would result in a cash inflow to the Company with the Warrants converting to Class A Common Stock with the liability being extinguished and the fair value of the Warrants at the time of exercise being recorded as an increase to equity.

Liquidity and Capital Resources

The following table presents net cash provided by (used in) operating activities, used in investing activities and provided by (used in) financing activities for the thirty-nine weeks ended October 3, 2021 (Successor) and thirty-nine weeks ended September 27, 2020 (Combined).

Successor Predecessor Combined

(in thousands) Thirty-nine weeks ended October 3, 2021 From

August 29, 2020

September 27, 2020 From

December 30, 2019

August 28, 2020 Thirty-nine weeks ended September 27, 2020

Net cash provided by (used in) operating activities $ 4,282 $ (27,748) $ 30,627 $ 2,879

The following table presents net cash provided by operating activities, investing activities and financing activities for the thirteen weeks ended April 3, 2022 and April 4, 2021.

(in thousands) Thirteen weeks ended April 3, 2022 Thirteen weeks ended April 4, 2021

Net cash used in operating activities $ (36,004) $ (13,183)

Net cash used in investing activities $ (249) $ (25,311)

Net cash provided by (used in) financing activities $ 9,254 $ (4,317)

For the thirty-nine weeks ended October 3, 2021 (Successor), our consolidated cash balance, including cash equivalents, was $26.0 million or $20.9 million lower than at January 3, 2021.

Net cash provided by operating activities for the thirty-nine weeks ended October 3, 2021 (Successor) was $4.3 million compared to $2.9 million thirty-nine weeks ended September 27, 2020 (Combined), with the difference largely driven by changes in accounts receivable and inventory, and reductions in accrued expenses largely driven by higher year over year compensation payouts.

Cash used in investing activities for the thirty-nine weeks ended October 3, 2021 (Successor) was $78.1 million mostly driven by the Vitner's and Festida Foods acquisitions totaling $66.6 million, versus cash used in investing activity of $210.0 million for the thirty-nine weeks ended September 27, 2020 (Combined), which was primarily driven by the acquisition of UBH and Kitchen Cooked.

Net cash provided by financing activities was $52.9 million for the thirty-nine weeks ended October 3, 2021 (Successor), which was primarily a result of the payoffs of the First Term Loan and the Bridge Credit Agreement, offset by the borrowings under Term Loan B, proceeds from the redemption of Warrants, and net borrowings on the ABL, versus net cash used in financing activities of $249.9 million for the thirty-nine weeks ended September 27, 2020 (Combined) which was primarily the result of payoff of debt with the business combination.

For the thirteen weeks ended April 3, 2022, our consolidated cash balance, including cash equivalents, was $14.9 million or $27.0 million lower than at January 2, 2022.

Net cash used in operating activities for the thirteen weeks ended April 3, 2022 was $36.0 million compared to $13.2 million thirteen weeks ended April 4, 2021, with the difference largely driven by the payment of $20.2 million in the first quarter of 2022 related to the buyout of multiple distributors, which were accounted for as contract terminations.

The thirteen weeks ended April 3, 2022 also included a larger cash outflow related to the building of inventory compared to the prior year comparable period.

Cash used in investing activities for the thirteen weeks ended April 3, 2022 was $0.2 million driven by purchases of property and equipment offset by proceeds from the sale of assets and receipt of an insurance claim, versus cash used in investing activity of $25.3 million for the thirteen weeks ended April 4, 2021, which was primarily driven by the acquisition of Vitner's.

Net cash provided by financing activities was $9.3 million for the thirteen weeks ended April 3, 2022, driven by an increase in the line of credit of $20.0 million offset by cash payments on net settled stock based compensation and the payment of dividends, versus net cash used in financing activities of $4.3 million for the thirteen weeks ended April 4, 2021, which was primarily a result of the payoffs of the First Term Loan and the Bridge Credit Agreement, offset by the borrowings under Term Loan B, proceeds from the redemption of warrants, and net borrowings on the ABL.

Financing Arrangements

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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.

On November 21, 2017, UBH entered into an asset based revolving credit facility (as amended, the "ABL facility").

The ABL facility was set to expire on the fifth anniversary of closing, or November 21, 2022.

1 unchanged sentence

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

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

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 October 3, 2021 and January 3, 2021, $133.2 million and $106.4 million, respectively, was available for borrowing, net of letters of credit.

As of April 3, 2022 and January 2, 2022, $56.0 million and $36.0 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.

As of April 3, 2022 and January 2, 2022, $80.8 million and $96.9 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 October 3, 2021 and September 27, 2020, would have been 3.75% and 3.75%, respectively.

The Company elected to use the LIBOR rate, the interest rate on the ABL facility as of October 3, 2021 was 1.58%.

Had there been outstanding balances and the Company elected to use the LIBOR rate as of September 27, 2020, the interest rate would have been 1.68%.

The ABL facility is also subject to unused line fees (0.5% at October 3, 2021) and other fees and expenses.

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

Had the Company elected to use the Prime rate, the interest rate on the facility as of April 3, 2022 and April 4, 2021, would have been 3.75%.

The Company elected to use the LIBOR rate, the interest rate on the ABL facility as of April 3, 2022 was 1.95%.

The Company elected to use the LIBOR rate as of April 4, 2021 and the interest rate was 1.61%.

The ABL facility is also subject to unused line fees (0.5% at April 3, 2022) and other fees and expenses.

Standby letters of credit in the amount of $10.3 million have been issued as of April 3, 2022 and January 2, 2022.

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

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.

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

The interest rate on the First Lien Term Loan as of September 27, 2020 was 5.10%.

In connection with Amendment No.

2 to the Credit Agreement, dated November 21, 2017 with Bank of America, N.A., as further described within this note, the outstanding balance of $410 million was repaid in full the interest rate on this instrument was 3.64% at the time of payoff.

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 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".

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.

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

On December 14, 2020, the Company entered into a Bridge Credit Agreement with a syndicate of banks, led by Bank of America, N.A.

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The proceeds of the Bridge Credit Agreement were used to fund the Company’s acquisition of Truco and the IP Purchase from OTB Acquisition, LLC, in which the Company withdrew $490.0 million to finance the Truco Acquisition and IP Purchase.

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

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

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

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.

Commitment fees and deferred financing costs on the Bridge Credit Agreement totaled $7.2 million, of which $2.6 million was expended in the thirteen weeks ended April 4, 2021.

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.

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.

On January 20, 2021, the Company entered into Amendment No.

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

The interest rate on Term Loan B was 3.08% as of October 3, 2021.

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

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Pursuant to the terms of Amendment No.

3, the Company increased the principal balance of Term Loan B by $75.0 million to bring the aggregated balance of Term Loan B proceeds to $795.0 million, of which $789.1 million remains outstanding as of October 3, 2021.

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 October 3, 2021.

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

This was accounted for as a financing transaction.

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

On July 28, 2021, the Company entered into an agreement with Banc of America Leasing & Capital, LLC, whereby the Company amended a master lease agreement to draw up to $19.0 million on new capital improvement projects.

During the thirteen weeks ended October 3, 2021 the Company has drawn $9.8 million related to certain manufacturing equipment and warehouse/distribution equipment.

This was accounted for as a financing transaction, and bears interest at the Bloomberg Short-Term Bank Yield index plus 1.75%.

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

The outstanding principal balance as of October 3, 2021 related to the equipment financing transactions above is $22.8 million.

Derivative Financial Instruments

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

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

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

At October 3, 2021, the effective fixed interest rate on the long-term debt hedged by this contract was 3.48%.

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

"Fair Value Measurements" and Note 12.

"Accumulated Other Comprehensive Income (Loss)."

IO Loan Purchase Commitments

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

The outstanding balance of loans guaranteed was $2.5 million and $4.1 million at October 3, 2021 and January 3, 2021, respectively, all of which was recorded by the Company as an off balance sheet arrangement.

The maximum amount of future payments the Company could be required to make under the guarantees equates to 25% of the outstanding loan balance up to $2.0 million.

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

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

The Company was in compliance with its financial covenant as of April 3, 2022.

Debt (in thousands)

Issue Date Principal Balance Interest Rate Maturity Date April 3, 2022 January 2, 2022

Term loan B June-21 $ 795,000 3.21 % January-28 $ 785,248 $ 787,236

Equipment loans 30,476 26,655

Revolving credit facility 56,000 36,000

Net impact of debt issuance costs and original issue discounts (7,588) (7,929)

Total long-term debt 864,136 841,962

current portion (11,414) (11,414)

Long term portion of term debt and financing obligations $ 852,722 $ 830,548

Other Notes Payable and Capital Leases

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

Additionally, during the first fiscal quarter of 2020, the Company purchased intellectual property that include a deferred purchase price of $0.5 million, of which $0.4 million and $0.5 million was outstanding as of October 3, 2021 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 $2.8 million was outstanding as of October 3, 2021.

During the first fiscal quarter of 2022, we bought out and terminated the contracts of multiple distributors who had previously been providing services to the Company.

These transaction were accounted for primarily as contract terminations and resulted in expense of $23.0 million.

As a condition of our buyout of distributors an additional $4.1 million is expected to be paid out and is included in other in the table below.

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 April 3, 2022 and January 2, 2022, respectively.

During the first fiscal quarter of 2020, the Company purchased intellectual property that include a deferred purchase price of $0.5 million, of which $0.3 million is outstanding as of April 3, 2022 and January 2, 2022, respectively.

Amounts outstanding under notes payable consisted of the following:

(in thousands) As of

April 3, 2022

As of January 2, 2022

Note payable – IO notes $ 22,387 $ 24,822

Capital lease 8,229 8,166

Other 5,570 1,678

Total notes payable 36,186 34,666

current portion (13,057) (9,957)

Long term portion of notes payable $ 23,129 $ 24,709

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

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

Due to the structure of the transactions, the sales did not qualify for sale accounting treatment and the Company has recorded the notes payable obligation owed by the IOs to the financial institution on its books;

During fiscal 2021, the Company sold an additional $11.8 million of notes receivable from IOs on its books for $12.5 million in a series of transactions to a financial institution.

Due to the structure of the transactions, they did not qualify for sale accounting treatment and the Company has recorded the notes payable obligation owed by the IOs to the financial institution on its books;

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

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

The underlying notes have various maturity dates through December 2028.

The underlying notes have various maturity dates through April 2030.

The Company partially guarantees the outstanding loans, as discussed in further detail within Note 11.

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

Interest expense for the thirteen weeks ended October 3, 2021 (Successor) was $7.7 million, $7.0 million of which was related to the Company’s credit facility and other long-term debt, of which $0.3 million was related to amortization of deferred financing fees, and $0.4 million of which was related to IO loans.

Interest expense for the thirty-nine weeks ended October 3, 2021 (Successor) was $26.5 million, $21.9 million of which was related to the Company’s credit facility and other long-term debt, of which $3.5 million was related to amortization of deferred financing fees, and $1.1 million of which was related to IO loans.

Interest expense for the Successor period from August 29, 2020 to September 27, 2020 was $1.8 million, $1.7 million of which was related to the Company’s credit facility and other long-term debt and $0.1 million of which was related to IO loans.

Interest expense for the Predecessor period from June 28, 2020 to August 28, 2020 was $7.0 million, $6.2 million of which was related to the Company’s credit facility and other long-term debt, $0.4 million of which was related to amortization of deferred financing fees, and $0.4 million of which was related to IO loans.

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

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

Interest Expense

Interest expense consisted of the following:

(in thousands) Thirteen weeks ended April 3, 2022 Thirteen weeks ended April 4, 2021

Company’s ABL facility and other long-term debt $ 8,331 $ 7,574

Amortization of deferred financing fees 341 2,870

IO loans 431 417

Total interest $ 9,103 $ 10,861

Off-Balance Sheet Arrangements

Purchase Commitments

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

These purchase commitments totaled $44.8 million as of October 3, 2021.

The Company has recorded purchase commitment gain (losses) totaling $0.1 million, $0.1 million and $0.2 million for the thirteen and thirty-nine weeks ended October 3, 2021 (Successor) and for the Successor period from August 29, 2020 to September 27, 2020, respectively.

The Company has recorded purchase commitment gain (losses) totaling $0.3 million and $(0.7) million for the predecessor periods from June 29, 2020 to August 28, 2020 and December 30, 2019 to August 28, 2020, respectively.

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 $46.3 million as of April 3, 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 losses totaling $0.0 million for the thirteen weeks ended April 3, 2022 and April 4, 2021.

IO Guarantees-Off-Balance Sheet

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

The outstanding balance of loans guaranteed was $2.0 million and $2.2 million at April 3, 2022 and January 2, 2022, respectively, all of which was recorded by the Company as an off balance sheet arrangement.

The maximum amount of future payments the Company could be required to make under the guarantees equates to 25% of the outstanding loan balance up to $2.0 million.

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 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 $13.1 million and $7.1 million at October 3, 2021 and January 3, 2021, respectively, which are off balance sheet.

The outstanding balance of loans guaranteed that were issued by Bank of America was $22.2 million and $18.6 million at April 3, 2022 and January 2, 2022, respectively, which are off balance sheet.

As discussed in Note 8.

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

The outstanding balance of notes purchased by Bank of America at October 3, 2021 and January 3, 2021 was $18.7 million and $16.5 million, respectively.

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

The outstanding balance of notes purchased by Bank of America at April 3, 2022 and January 2, 2022 was $18.5 million and $19.7 million, respectively.

Due to the structure of the transactions, 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 Consolidated Balance Sheets;

the corresponding note receivable also remained on the Company’s Consolidated Balance Sheets.

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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 $5.4 million and $6.6 million at October 3, 2021 and January 3, 2021, respectively, which are included in the notes payable and notes receivable sections of the Company's consolidated balance sheets.

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 $4.4 million and $4.9 million at April 3, 2022 and January 2, 2022, respectively, all of which was the Company's consolidated balance sheets.

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

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New Accounting Pronouncements

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

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

Application of Critical Accounting Policies and Estimates

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

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

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.

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

For the qualitative analysis performed, which took place on the first day of the fourth quarter, we have taken into consideration all the events and circumstances listed in FASB ASC 350, Intangibles—Goodwill and Other, in addition to other entity-specific factors that have taken place from the period of the business combination which assessed goodwill o n August 28, 2020.

There were no triggering events as of October 3, 2021 that would require an interim impairment analysis prior to the annual impairment test.

For the qualitative analysis performed, which took place on the first day of the fourth quarter of 2021, 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.

We have determined that there was no significant impact that affected the fair value of the reporting unit through April 3, 2022 .

T herefore, we have determined that it was not necessary to perform a quantitative goodwill impairment test for the reporting unit.

We account for income taxes pursuant to the asset and liability method of ASC 740, Income Taxes, which require us to recognize current tax liabilities or receivables for the amount of taxes we estimate are payable or refundable for the current year, and deferred tax assets and liabilities for the expected future tax consequences attributable to temporary differences between the financial statement carrying amounts and their respective tax bases of assets and liabilities and the expected benefits of net operating loss and credit carryforwards.

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

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

As of April 3, 2022 and January 2, 2022, no liability for unrecognized tax benefits was required to be reported.

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

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

Self-Insurance

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

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

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

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

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

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For quantitative and qualitative disclosures about market risk, see Item 7A.

"Quantitative and Qualitative Disclosures About Market Risk" of our 2020 Annual Report.

"Quantitative and Qualitative Disclosures About Market Risk" of our Annual Report on Form 10-K for the year ended January 2, 2022.

Our exposures to market risk have not changed materially since January 2, 2022.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis