What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-02 compared with 2022-03-03 · 361 added, 331 removed, 1058 unchanged (40% of the section changed)

4 unchanged sentences

Consolidated Balance Sheets as of January 1 , 202 3 and January 2 , 202 2

Consolidated Statements of Operations And Comprehensive Income (Loss) for the year ended January 2, 2022, fiscal periods ended January 3, 2021 and August 28, 2020, and year ended December 29, 2019

Consolidated Statements of Equity for the year ended January 2, 2022, fiscal periods ended January 3, 2021 and August 28, 2020, and year ended December 29, 2019

Consolidated Statements of Cash Flows for the year ended January 2, 2022, fiscal periods ended January 3, 2021 and August 28, 2020, and year ended December 29, 2019

Consolidated Statements of Operations And Comprehensive Income (Loss) for the year s ended January 1 , 202 3 and January 2, 2022 , and fiscal periods ended January 3, 2021 and August 28, 2020

Consolidated Statements of Equity for the year s ended January 1, 2023 and January 2, 2022, and fiscal periods ended January 3, 2021 and August 28, 2020

Consolidated Statements of Cash Flows for the year s ended January 1, 2023 and January 2, 2022, and fiscal periods ended January 3, 2021 and August 28, 2020

Notes to Consolidated Financial Statements

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We have audited the accompanying consolidated balance sheets of Utz Brands, Inc.

(a Delaware corporation) and subsidiaries (the "Company" or "Successor") as of January 2, 2022 and January 3, 2021, the related consolidated statements of comprehensive income (loss), equity (deficit), and cash flows of the Successor and Utz Brands Holdings, LLC (a Delaware limited liability company) ("Predecessor") for the year ended January 2, 2022 (Successor), the periods from August 29, 2020 to January 3, 2021 (Successor) and December 30, 2019 to August 28, 2020 (Predecessor), and the year ended December 29, 2019 (Predecessor), and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 2, 2022 and January 3, 2021, and the results of its operations and its cash flows for the year ended January 2, 2022 (Successor), the periods from August 29, 2020 to January 3, 2021 (Successor) and December 30, 2019 to August 28, 2020 (Predecessor), and the year ended December 29, 2019 (Predecessor) in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of January 2, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 3, 2022 expressed include an unqualified opinion.

Change in accounting principle

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for leases in 2021 due to the adoption of Accounting Standards Update 2016-02, Leases (Accounting Standards Codification Topic 842).

(a Delaware corporation) and subsidiaries (the “Company” or “Successor”) as of January 1, 2023 (Successor) and January 2, 2022 (Successor), the related consolidated statements of comprehensive income (loss), equity (deficit), and cash flows of the Successor and Utz Brands Holdings, LLC (a Delaware limited liability company) (“Predecessor”) for the years ended January 1, 2023 (Successor) and January 2, 2022 (Successor) and for the periods from August 29, 2020 to January 3, 2021 (Successor) and December 29, 2019 to August 28, 2020 (Predecessor), and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 1, 2023 (Successor) and January 2, 2022 (Successor), and the results of its operations and its cash flows for the years ended January 1, 2023 (Successor) and January 2, 2022 (Successor) and for the periods from August 29, 2020 to January 3, 2021 (Successor) and December 29, 2019 to August 28, 2020 (Predecessor), in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of January 1, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 2, 2023 expressed an unqualified opinion.

Basis for opinion

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Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

The critical audit matter communicated is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

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Customer trade promotions

As described further in note 1 (Revenue Recognition) to the consolidated financial statements, the Company has recorded a provision for customer trade allowances, consisting primarily of pricing allowances and programs associated with sales to customers.

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

As described further in Note 1 (Revenue Recognition) to the consolidated financial statements, the Company has recorded a reserve for customer trade allowances, consisting primarily of pricing allowances and programs associated with uncollected sales to customers.

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

The reserve recorded requires management judgment regarding the volume of promotional offers that will be redeemed by either the retail trade customer or consumer.

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

The Company’s reserve for customer trade allowances as of January 2, 2022 was $26.5 million.

The principal consideration for our determination that customer trade promotions is a critical audit matter is due to uncertainty around the amount and timing of settlements, which typically occur in a period subsequent to the related sales transactions.

We identified the Company’s reserve for customer trade allowances associated with uncollected sales totaling $13.5 million as a critical audit matter.

The principal consideration for our determination that customer trade promotions associated with uncollected sales to customers is a critical audit matter is due to uncertainty around the amount and timing of settlements, which typically occur in a period subsequent to the related sales transactions.

Our audit procedures related to the customer trade promotions included the following, among others:

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s trade promotions process at disaggregated levels.

This included controls related to the recording of the Company’s current trade spending and calculations of the trade reserves.

• We evaluated the design and tested the operating effectiveness of internal controls related to the recording of the Company’s trade spending and calculations of trade reserves.

• We analyzed the reserve by trade promotion type to identify unusual trends.

• We assessed the Company’s historical ability to accurately estimate its customer trade allowances by comparing historical estimates to final settlements.

We compared a sample of settlements subsequent to period end to the amount previously recognized by the Company.

• We compared a selection of settlements subsequent to period end to the amounts estimated as of year end by the Company.

/s/ GRANT THORNTON LLP

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Accrued expenses and other 92,012 71,280

Current portion of warrant liability — 52,580

Total current liabilities 237,433 188,020

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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the year ended January 2, 2022, fiscal periods ended January 3, 2021 and August 28, 2020, and year ended December 29, 2019

For the year ended January 1, 2023, year ended January 2, 2022, and fiscal periods ended January 3, 2021 and August 28, 2020

(In thousands, except share information)

Successor Predecessor

For the year ended January 2, 2022 From

For the year ended January 1, 2023 For the year ended January 2, 2022 From

August 29, 2020

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December 30, 2019

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

August 28, 2020

Net sales $ 1,408,401 $ 1,180,713 $ 325,648 $ 638,662

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Gross profit 449,057 383,909 105,671 227,067

Selling, general and administrative expenses

Selling 249,352 63,616 131,579 163,589

General and administrative 125,855 43,871 64,050 64,723

Total selling, general and administrative expenses 375,207 107,487 195,629 228,312

Gain on sale of assets

Gain on disposal of property, plant and equipment, net 1,133 109 79 6,028

Gain on sale of routes, net 731 749 1,264 7,232

Total gain on sale of assets 1,864 858 1,343 13,260

Selling, distribution and administrative expenses

Selling and distribution 294,061 249,352 63,616 131,579

Administrative 150,343 125,855 43,871 64,050

Total selling, distribution, and administrative expenses 444,404 375,207 107,487 195,629

Gain on sale of assets, net 691 1,864 858 1,343

Income (loss) from operations 5,344 10,566 ( 958 ) 32,781

Other income (expense)

Other (expense) income

Interest expense ( 44,424 ) ( 34,708 ) ( 13,301 ) ( 26,659 )

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Gain (loss) on remeasurement of warrant liability 720 36,675 ( 91,851 ) —

Other income (expense), net 5,518 ( 107,210 ) ( 25,388 ) ( 48,964 )

Income (loss) before income taxes 16,084 ( 108,168 ) 7,393 ( 10,218 )

Income tax expense (benefit) 8,086 ( 267 ) 3,973 3,146

Net income (loss) 7,998 ( 107,901 ) 3,420 ( 13,364 )

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

Net income (loss) attributable to controlling interest $ 20,555 $ ( 99,930 ) $ 3,420 $ ( 16,172 )

Earnings per share of Class A Common Stock:

Other (expense) income, net ( 43,304 ) 5,518 ( 107,210 ) ( 25,388 )

(Loss) income before income taxes ( 37,960 ) 16,084 ( 108,168 ) 7,393

Income tax (benefit) expense ( 23,919 ) 8,086 ( 267 ) 3,973

Net (loss) income ( 14,041 ) 7,998 ( 107,901 ) 3,420

Net loss attributable to noncontrolling interest 13,649 12,557 7,971 —

Net (loss) income attributable to controlling interest $ ( 392 ) $ 20,555 $ ( 99,930 ) $ 3,420

(Loss) earnings per share of Class A Common Stock:

Basic $ — $ 0.26 $ ( 1.64 )

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Diluted 80,093,094 81,090,229 61,085,943

Net (loss) income $ ( 14,041 ) $ 7,998 $ ( 107,901 ) $ 3,420

Other comprehensive gain (loss):

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Comprehensive income (loss) 33,238 10,789 ( 106,977 ) ( 4,043 )

Net comprehensive (income) loss attributable to noncontrolling interest ( 6,568 ) 12,557 7,971 —

Net comprehensive income (loss) attributable to controlling interest $ 26,670 $ 23,346 $ ( 99,006 ) $ ( 4,043 )

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

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CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)

For the year ended January 2, 2022, fiscal periods ended January 3, 2021 and August 28, 2020, and year ended December 29, 2019

For the year ended January 1, 2023, year ended January 2, 2022, and fiscal periods ended January 3, 2021 and August 28, 2020

(In thousands, except share information)

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Balance at December 29, 2019 $ ( 27,446 ) $ 1,408 $ ( 7,314 ) $ ( 33,352 )

Net (loss) income ( 16,172 ) — 2,808 ( 13,364 )

Other comprehensive income — 1,408 — 1,408

Contributions from members and noncontrolling interest 120,158 — 3,750 123,908

Distributions to members and noncontrolling interest ( 11,461 ) — ( 2,527 ) ( 13,988 )

Balance at December 29, 2019 ( 27,446 ) 1,408 ( 7,314 ) ( 33,352 )

Net income 3,420 — — 3,420

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Balance at January 3, 2021 71,094,714 $ 7 60,349,000 $ 6 $ 793,461 $ ( 241,490 ) $ 924 $ 552,908 $ 831,994 $ 1,384,902

Class A Common Stock Class V Common Stock Additional Paid-in Capital Accumulated (Deficit) Accumulated Other Comprehensive Income Total Stockholders' Equity Non-controlling Interest Total Equity

Successor Shares Amount Shares Amount

Balance at January 3, 2021 71,094,714 $ 7 60,349,000 $ 6 $ 793,461 $ ( 241,490 ) $ 924 $ 552,908 $ 831,994 $ 1,384,902

Conversion of warrants 4,976,717 — — 144,659 — — 144,659 ( 32,714 ) 111,945

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Balance at January 2, 2022 77,644,645 $ 8 59,349,000 $ 6 $ 912,574 $ ( 236,598 ) $ 3,715 $ 679,705 $ 754,968 $ 1,434,673

Payments of tax withholding requirements for employee stock awards — — ( 6,217 ) — — ( 6,217 ) — ( 6,217 )

Share-based compensation 1,132,316 — — 10,632 — — 10,632 — 10,632

Issuance of common stock in connection with private placement sale 2,105,373 — — 28,000 — — 28,000 — 28,000

Tax impact arising from capital transactions — — ( 18,070 ) — — ( 18,070 ) — ( 18,070 )

Net loss — — — ( 392 ) — ( 392 ) ( 13,649 ) ( 14,041 )

Other comprehensive income — — — — 27,062 27,062 20,217 47,279

Cash dividends declared ($ 0.219 per

share of Class A Common Stock)

— — — ( 17,574 ) — ( 17,574 ) — ( 17,574 )

Distribution to noncontrolling interest — — — — — — ( 12,998 ) ( 12,998 )

Balance at January 1, 2023 80,882,334 $ 8 59,349,000 $ 6 $ 926,919 $ ( 254,564 ) $ 30,777 $ 703,146 $ 748,538 $ 1,451,684

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

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CONSOLIDATED STATEMENTS OF CASH FLOWS

For the year ended January 2, 2022, fiscal periods ended January 3, 2021 and August 28, 2020, and year ended December 29, 2019

For the year ended January 1, 2023, year ended January 2, 2022, and fiscal periods ended January 3, 2021 and August 28, 2020

(In thousands)

Successor Predecessor

For the year ended January 2, 2022 From

For the year ended January 1, 2023 For the year ended January 2, 2022 From

August 29, 2020

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December 30, 2019

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

August 28, 2020

Cash flows from operating activities

Net income (loss) $ 7,998 $ ( 107,901 ) $ 3,420 $ ( 13,364 )

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Net (loss) income $ ( 14,041 ) $ 7,998 $ ( 107,901 ) $ 3,420

Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:

Impairment and other charges 4,678 — — —

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(Gain) loss on remeasurement of warrant liability ( 720 ) ( 36,675 ) 91,851 —

Gain on disposal of property and equipment ( 1,133 ) ( 109 ) ( 79 ) ( 6,028 )

Gain on sale of routes ( 731 ) ( 749 ) ( 1,264 ) ( 7,232 )

Gain on sale of assets ( 691 ) ( 1,864 ) ( 858 ) ( 1,343 )

Stock based compensation 10,632 12,961 6,790 —

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Proceeds from the sale of IO notes 5,017 11,762 — —

Proceeds from insurance claims for capital investments 3,935 — — —

Notes receivable, net ( 24,711 ) ( 13,998 ) ( 4,470 ) ( 3,611 )

1 unchanged sentence

Cash flows from financing activities

Line of credit borrowings, net ( 36,000 ) 36,000 — —

Borrowings on term debt and notes payable 124,592 825,139 370,000 2,650

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Payment of debt issuance cost ( 3,660 ) ( 9,210 ) — —

Contribution from member and noncontrolling interest — — — 123,908

Payments of tax withholding requirements for employee stock awards ( 6,217 ) — — —

Exercised warrants — 57,232 124,495 —

Proceeds from issuance of shares 28,000 — — —

Dividends paid ( 17,157 ) ( 11,908 ) ( 2,968 ) —

2 unchanged sentences

Net cash provided by (used in) financing activities 58,906 82,778 241,973 ( 10,451 )

Net (decrease) increase in cash and cash equivalents ( 4,933 ) ( 440,841 ) ( 1,340 ) 8,139

Net increase (decrease) in cash and cash equivalents 31,032 ( 4,933 ) ( 440,841 ) ( 1,340 )

Cash and cash equivalents at beginning of period 41,898 46,831 487,672 15,053

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The Noncontrolling interest represents the common limited liability company units of UBH held by the Continuing Members.

The financial statements include the accounts of the Predecessor, prior to the Business Combination, which was determined to be consolidated UBH, which includes the accounts of its wholly-owned subsidiary, Utz Quality Foods, LLC (“UQF”).

UQF is consolidated with its wholly-owned subsidiaries:

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and GH Pop Holdings, LLC, with its wholly-owned subsidiaries Good Health Natural Products, LLC (“Good Health”), Condor Snack Foods, LLC, and Snikiddy, LLC (“Snikiddy”).

SRS Leasing LLC and its subsidiaries (“SRS”) were companies formed to acquire, hold and lease real estate to UQF.

In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, Consolidation, UQF was determined to be the primary beneficiary of SRS, an entity under common ownership.

The accounts of SRS have been consolidated with those of UQF as of and for the fiscal year ended December 29, 2019.

On December 30, 2019, the first day of the fiscal year of 2020, SRS was merged into UQF, with UQF surviving the transaction.

The accumulated (deficit) equity of SRS was presented on the noncontrolling interest line of the consolidated balance sheet as of December 29, 2019 and was reclassified to members’ (deficit) equity on December 30, 2019, the date of the merger.

Rice Investments, L.P.

(“RILP”) was formed as a limited partnership pursuant to the Delaware Revised Uniform Limited Partnership Act on January 30, 2004 for the purpose of acquiring, owning, managing, and selling or otherwise disposing of intellectual property (namely trade names) that are used by UQF.

RILP had one general partner, UQF, and one limited partner, UM-R Intermediate, LLC (“Intermediate R”).

UQF, in accordance with ASC 810, was determined to be the primary beneficiary of RILP, an entity under common ownership.

The accounts of RILP have been consolidated with those of UQF as of and for the fiscal year ended December 29, 2019.

On December 30, 2019 Intermediate R was merged into Intermediate U with Intermediate U surviving the transaction.

Finally, and immediately following that merger, RILP merged into UQF, with UQF being the surviving entity and Intermediate U remaining the sole member of UQF.

Prior to these mergers the statements of SRS, RILP, and Intermediate R were combined within the financial statements of Intermediate U.

On March 18, 2020, Intermediate U changed its name to Utz Brands Holdings, LLC upon filing a Certificate of Amendment with the Secretary of State of the State of Delaware.

All intercompany transactions and balances have been eliminated in combination/consolidation.

During fiscal 2022, the Company completed an optimization project whereby certain entities, including but not limited to Truco Holdco, Inc.

were dissolved, and Truco Enterprises, LP was converted from a limited partnership to a limited liability company.

Operating Entities Holding Entities

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and its subsidiaries Heron Holding Corporation

Kennedy Endeavors, LLC Truco Holdco, Inc.

Good Health Natural Products, LLC R.W.

Kennedy Endeavors, LLC R.W.

Garcia Holdings, LLC

Good Health Natural Products, LLC

Condor Snack Foods, LLC

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Kitchen Cooked, Inc.

Truco Enterprises, LP

Truco Enterprises, LLC

Garcia Co., Inc.

Loss of Emerging Growth Company Status – As of January 2, 2022, we no longer identify as an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the "Securities Act"), as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and we previously took advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended (the "Sarbanes-Oxley Act"), reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Loss of Emerging Growth Company Status – As of January 2, 2022, the Company no longer qualified as an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the "Securities Act"), as modified by the Jumpstart our Business Startups Act of 2012, (the "JOBS Act”), and we previously took advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended (the "Sarbanes-Oxley Act"), reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) are required to comply with the new or revised financial accounting standards.

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This may make comparison of the Company’s financial statements with another public company which is either not an emerging growth company or is an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Due to the loss of our Emerging Growth Company status, as discussed above, we adopted Topic 842 effective of the first day of fiscal year 2021 within this Form 10-K.

This guidance was not adopted within our Form 10-Q's during the fiscal year 2021, therefore the results related to Topic 842 are not comparable with those periods.

Operations – The Company through its wholly owned subsidiary UQF, is a premier producer, marketer and distributor of snack food products since 1921.

The Company has steadily expanded its distribution channels to where it now sells products to supermarkets, mass merchants, club stores, dollar and discount stores, convenience stores, independent grocery stores, drug stores, food service, vending, military, and other channels in most regions of the United States through routes to market that include direct-store-delivery, direct to warehouse, and third-party distributors.

Reclassification – Certain prior year amounts have been reclassified for consistency with the current year presentation.

In our Consolidated Statements of Operation and Comprehensive Income and our Consolidated Statements of Cash Flows, included in our Quarterly Report on Form 10-Q for the fiscal quarter ended April 3, 2022, the Company began combining Gain on disposal of property, plant and equipment, net and Gain on sale of routes, net, into a single line item as (Loss) gain on sale of assets to simplify our reporting presentation.

The reclassification had no impact on total operating costs, earnings from operations, net earnings, earnings per share or total equity.

Operations – The Company through its wholly owned subsidiary, UQF, has been a premier producer, marketer and distributor of snack food products since 1921.

The Company has steadily expanded its distribution channels to where it now sells products to supermarkets, mass merchants, club stores, dollar and discount stores, convenience stores, independent grocery stores, drug stores, food service, vending, military, and other channels in most regions of the United States through routes to market, that include direct-store-delivery (“DSD”), direct to warehouse, and third-party distributors.

The Company manufactures and distributes a full line of high-quality salty snack items, such as potato chips, tortilla chips, pretzels, cheese balls, pork skins, party mixes, and popcorn.

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Accounts Receivables – Accounts receivable are reported at net realizable value.

The net realizable value is based on management’s estimate of the amount of receivables that will be collected based on analysis of historical data and trends, as well as review of significant customer accounts.

The net realizable value is based on Company management’s estimate of the amount of receivables that will be collected based on analysis of historical data and trends, as well as review of significant customer accounts.

Accounts receivable are considered to be past due when payments are not received within the customer’s credit terms.

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The Company assesses for impairment on property, plant and equipment upon the occurrence of a triggering event.

Income Taxes – The Company accounts for income taxes pursuant to the asset and liability method of ASC 740, Income Taxes, which requires it to recognize current tax liabilities or receivables for the amount of taxes it estimates are payable or refundable for the current year, and deferred tax assets and liabilities for the expected future tax consequences attributable to temporary differences between the financial statement carrying amounts and their respective tax bases of assets and liabilities and the expected benefits of net operating loss and credit carryforwards.

Income Taxes – The Company accounts for income taxes pursuant to the asset and liability method of Accounting Standards Codification (“ASC”) 740, Income Taxes, which requires it to recognize current tax liabilities or receivables for the amount of taxes it estimates are payable or refundable for the current year, and deferred tax assets and liabilities for the expected future tax consequences attributable to temporary differences between the financial statement carrying amounts and their respective tax bases of assets and liabilities and the expected benefits of net operating loss and credit carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

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Interest costs and related penalties related to unrecognized tax benefits are required to be calculated, if applicable.

The Company’s policy is to classify assessments, if any, for tax related interest as interest expense and penalties as selling, general and administrative expenses.

The Company’s policy is to classify assessments, if any, for tax related interest as interest expense and penalties as selling, distribution, general and administrative expenses ("SD&A").

As of January 1, 2023 and January 2, 2022, no liability for unrecognized tax benefits was required to be reported.

The Company does not expect any significant changes in its unrecognized tax benefits in the next fiscal year.

Distribution Route Acquisition and Sale Transactions – The Company acquires and sells distribution routes as a part of the Company’s maintenance of its direct-store delivery (“DSD”) network.

Distribution Route Acquisition and Sale Transactions – The Company acquires and sells distribution routes as a part of the Company’s maintenance of its DSD network.

As new independent operators ("IOs”) are identified, the Company either sells its newly-created or existing Company-managed routes to IOs or sells routes that were previously acquired by the Company to IOs.

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Finite-lived intangible assets are tested for impairment only when management has determined that potential impairment indicators are present.

Goodwill and other indefinite-lived intangible assets (including certain trade names, certain master distribution rights and company-owned sales routes) are not amortized but are tested for impairment at least annually and whenever events or circumstances change that indicate impairment may have occurred.

Goodwill and other indefinite-lived intangible assets (including certain trademarks, trade names, certain master distribution rights and Company-owned sales routes) are not amortized but are tested for impairment at least annually and whenever events or circumstances change that indicate impairment may have occurred.

The Company tests goodwill for impairment at the reporting unit level.

The Company has identified the existing snack food operations as its sole reporting unit.

As the Company has early adopted the FASB Accounting Standards Update (“ASU”) No.

In accordance with the FASB Accounting Standards Update ("ASU”) No.

2017-04, Intangibles - Goodwill and Other ("Topic 350”):

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If an entity believes, as a result of each qualitative assessment, it is more likely than not that the fair value of goodwill or an indefinite-lived intangible asset exceeds its carrying value then a quantitative impairment test is not required.

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

For the latest qualitative analysis performed, which took place on the first day of the fourth quarter of 2022, we had taken into consideration all the events and circumstances listed in FASB ASC 350, Intangibles—Goodwill and Other, in addition to other entity-specific factors that have taken place from the period of the business combination, which assessed goodwill, on August 28, 2020.

Our fiscal year 2022 qualitative analysis concluded that Goodwill and all but one of our intangible assets is not more likely than not to be impaired.

We performed a quantitative impairment test on the intangible asset during which we compared the fair value of the intangible, using a relief from royalty method, to the carrying value of the asset and determined that the intangible asset was not impaired.

Share-Based Compensation – Share-based compensation is rewarded to employees and directors of the Company and accounted for in accordance with ASC 718, Compensation—Stock Compensation (“ASC 718”).

Share-Based Compensation – Share-based compensation is rewarded to associates and directors of the Company and accounted for in accordance with ASC 718, Compensation—Stock Compensation ("ASC 718”).

Share-based compensation expense is recognized for equity awards over the vesting period based on their grant-date fair value.

During the Successor period, the Company uses various forms of long-term incentives including, but not limited to, Stock Options, Restricted Stock Units (“RSUs”) and Performance Share Units (“PSUs”), provided that the exercise and issuance of such stock options was contingent upon the Company filing a Registration Statement on Form S-8 ("Form S-8") with the SEC, which occurred on November 2, 2020.

During the Successor period, the Company uses various forms of long-term incentives including, but not limited to, stock options, restricted stock units ("RSUs”) and performance share units ("PSUs”), provided that the exercise of such stock options granted immediately following the Business Combination was contingent upon the Company filing a Registration Statement on Form S-8 ("Form S-8") with the SEC, which occurred on November 2, 2020.

The fair value of stock options is estimated at the date of grant using the Black-Scholes valuation model.

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The grant date fair value of the PSUs is determined using the Monte Carlo simulation model.

The grant date fair value of the RSUs is determined using the Company’s share price on the grant date.

The grant date fair value of the RSUs is determined using the Company’s closing trading price on the grant date.

Share-based compensation expense is included within the same financial statement caption where the recipient’s other compensation is reported.

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

Total health care expense under the program was $ 18.0 million for the year ended January 2, 2022, $ 6.5 million and $ 9.9 million for the Successor period from August 29, 2020 to January 3, 2021 and for the Predecessor period from December 30, 2019 to August 28, 2020, respectively, and was $ 16.6 million for the year ended December 29, 2019.

Total health care expense under the program was $ 18.7 million for the fiscal year ended January 1, 2023, and $ 18.0 million for the fiscal year ended January 2, 2022, and $ 6.5 million and $ 9.9 million for the Successor period from August 29, 2020 to January 3, 2021 and for the Predecessor period from December 30, 2019 to August 28, 2020, respectively.

The reserve for unpaid claims, which includes an estimate of claims incurred but not reported, was $ 1.6 million and $ 1.9 million at January 1, 2023 and January 2, 2022, respectively.

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

The expense associated with automobile, general liability and workers’ compensation insurance programs totaled $ 8.7 million for the year ended January 2, 2022, $ 1.5 million and $ 6.5 million for the Successor period from August 29, 2020 to January 3, 2021 and for the Predecessor period from December 30, 2019 to August 28, 2020, respectively, and was $ 9.0 million for the year ended December 29, 2019.

The expense associated with automobile, general liability and workers’ compensation insurance programs totaled $ 8.5 million for the year ended January 1, 2023, $ 8.7 million for the year ended January 2, 2022, and $ 1.5 million and $ 6.5 million for the Successor period from August 29, 2020 to January 3, 2021 and for the Predecessor period from December 30, 2019 to August 28, 2020, respectively.

The Company also records reserves for unpaid claims and an estimate for claims incurred but not yet reported, including an estimate for the development of any such claim.

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Shipping and Handling – The Company records shipping and handling expenses within selling expenses.

Shipping and handling expenses for products shipped to customers totaled $ 57.0 million for the year ended January 2, 2022, $ 12.6 million and $ 22.0 million for the Successor period from August 29, 2020 to January 3, 2021 and for the Predecessor period from December 30, 2019 to August 28, 2020, respectively, and was $ 27.7 million for the year ended December 29, 2019.

Shipping and handling expenses for products shipped to customers totaled $ 59.5 million for the year ended January 1, 2023, $ 57.0 million for the year ended January 2, 2022, and $ 12.6 million and $ 22.0 million for the Successor period from August 29, 2020 to January 3, 2021 and for the Predecessor period from December 30, 2019 to August 28, 2020, respectively.

Advertising Costs – Advertising costs are charged to operations when incurred.

The Company had no significant direct response advertising.

Advertising expenses totaled $ 11.8 million for the year ended January 2, 2022, $ 6.0 million and $ 5.1 million for the Successor period from August 29, 2020 to January 3, 2021 and for the Predecessor period from December 30, 2019 to August 28, 2020, respectively, and was $ 8.0 million for the year ended December 29, 2019.

Employee Benefits – The Company maintains several contributory 401(k) retirement plans (the “Plans”) for its employees.

Profit sharing contributions are made at the discretion of the Board of Directors and expenses recognized related to the profit sharing contribution was $ 3.9 million for the year ended January 2, 2022, $ 1.8 million and $ 3.5 million for the Successor period from August 29, 2020 to January 3, 2021 and for the Predecessor period from December 30, 2019 to August 28, 2020, respectively, and was $ 4.9 million for the year ended December 29, 2019.

The Plans provide employees with matching contributions primarily at 20 % of their contributions as defined in the Plans.

The expense related to the matching contributions was $ 1.9 million for the year ended January 2, 2022, $ 0.6 million and $ 1.1 million for the Successor period from August 29, 2020 to January 3, 2021 and for the Predecessor period from December 30, 2019 to August 28, 2020, respectively, and totaled $ 1.4 million for the year ended December 29, 2019.

Advertising expenses totaled $ 9.9 million for the year ended January 1, 2023, $ 11.8 million for the year ended January 2, 2022, and $ 6.0 million and $ 5.1 million for the Successor period from August 29, 2020 to January 3, 2021 and for the Predecessor period from December 30, 2019 to August 28, 2020, respectively.

Employee Benefits – The Company maintains several contributory 401(k) retirement plans (the "Plans”) for its associates.

Profit sharing contributions are made at the discretion of the Board of Directors and expenses recognized related to the profit sharing contribution was $ 6.3 million for the year ended January 1, 2023, $ 3.9 million for the year ended January 2, 2022, and $ 1.8 million and $ 3.5 million for the Successor period from August 29, 2020 to January 3, 2021 and for the Predecessor period from December 30, 2019 to August 28, 2020, respectively.

The Plans provide associates with matching contributions primarily at 20 % of their contributions as defined in the Plans.

The expense related to the matching contributions was $ 1.4 million for the year ended January 1, 2023, $ 1.9 million for the year ended January 2, 2022, and $ 0.6 million and $ 1.1 million for the Successor period from August 29, 2020 to January 3, 2021 and for the Predecessor period from December 30, 2019 to August 28, 2020, respectively.

Revenue Recognition – The Company’s revenues primarily consist of the sale of salty snack items to customers, including supermarkets, mass merchants, club stores, dollar and discount stores, convenience stores, independent grocery stores, drug stores, food service, vending, military, and other channels.

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

The Company has reserves in place of $ 26.5 million as of January 2, 2022 and $ 17.6 million as of January 3, 2021.

The Company has reserves in place of $ 46.3 million as of January 1, 2023, which include adjustments taken by customers of $ 32.8 million that are awaiting final processing and reserves of $ 26.5 million as of January 2, 2022, which include adjustments taken by customers of $ 16.9 million that are awaiting final processing.

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

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If the screen is not met, further determination is required as to whether or not the Company has acquired inputs and processes that have the ability to create outputs which would meet the definition of a business.

Significant judgment is required in the application of the screen test to determine whether an acquisition is a business combination or an acquisition of assets.

Significant judgment is required in the application of the screen test to determine whether an acquisition is accounted for as business combination or an acquisition of assets.

The Company uses the acquisition method of accounting for acquired businesses.

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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.

Distributor Buyouts - During fiscal year 2022, the Company bought out and terminated the contracts of multiple third-party distributors who had previously been providing services to the Company.

These transactions were accounted for as contract terminations and asset purchases, resulted in expense of $ 23.0 million for 52 weeks ended January 1, 2023 and are included within selling and distribution expense on the Consolidated Statement of Operations and Comprehensive Income for such period.

Use of Estimates – Management uses estimates and assumptions in preparing the consolidated financial statements in accordance with U.S.

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Actual results could vary materially from the estimates that were used.

Recently Issued Accounting Standards – In December 2019, the FASB issued "ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes" ("Topic 740").

This ASU is intended to simplify various aspects related to accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarifying certain aspects of the current guidance to promote consistency among reporting entities.

For public business entities, ASU 2019-12 was effective for annual periods beginning after December 15, 2020 and interim periods within those annual periods, with early adoption permitted.

We adopted this standard upon the loss of our emerging growth status as of January 2, 2022.

Adoption of the new standard did not have a material impact on our consolidated financial statements.

In February 2016, the FASB issued ASU No.

2016-02, Leases (“Topic 842”), which requires a lessee to recognize in its balance sheet an asset and liability for most leases with a term greater than 12 months.

Lessees should recognize a liability to make lease payments and a right-of-use ("ROU") asset representing the lessee’s right to use the underlying asset for the lease term.

We adopted the new guidance effective January 4, 2021 using the modified retrospective approach.

The primary impact of adopting this standard was the recognition of $ 28.6 million of operating ROU liabilities and $ 29.0 million of operating ROU assets.

The adoption did not have a material impact on how we account for finance leases.

"Leases" for more information regarding our leasing arrangements.

Recently Issued Accounting Standards – In March 2020, the FASB issued "ASU No.

2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting" ("Topic 848").

This ASU provides practical expedients and exceptions for applying U.S.

GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The expedients and exceptions provided by the amendments in this update apply only to contracts, hedging relationships, and other transactions that reference the London interbank offered rate ("LIBOR") or another reference rate expected to be discontinued as a result of reference rate reform.

Topic 848 is elective and effective as of March 12, 2020 through December 31, 2022.

Once elected, Topic 848 must be applied prospectively for all eligible contract modifications.

As part of the response to reference rate reform, in September 2022 the Company modified contracts related to the revolving credit facility, Term Loan B, and the interest rate hedge from an interest rate based upon the LIBOR benchmark to the Term SOFR Screen Rate ("SOFR").

"Long-Term Debt" and Note 9.

"Derivative Financial Instruments and Purchase Commitments" for additional details about these changes and to the referenced instruments.

Concurrent with these modifications the Company adopted Topic 848.

The Company utilized optional practical expedients for contract modifications and the adoption of the standard did not have a material impact on the Company's debt or hedge instruments.

In June 2016, ASU No.

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Measurement of Credit Losses on Financial Instruments ("Topic 326") was issued.

This ASU requires entities to measure the impairment of certain financial instruments, including accounts receivables, based on expected losses rather than incurred losses.

For non-public business entities or emerging growth companies, this ASU is effective for fiscal years beginning after December 15, 2022, with early adoption permitted, and will be effective for the Company beginning in 2023.

The Company is currently evaluating the impact of the new standard on the Company’s consolidated financial statements and related disclosures.

In March 2020, the FASB issued ASU No.

2020-04, Reference Rate Reform (“Topic 848”):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance for a limited period of time to ease the potential burden in accounting for reference rate reform on financial reporting.

The amendments in this ASU are effective for all entities as of March 12, 2020 through December 31, 2022.

The amendments of this ASU should be applied on a prospective basis.

The Company is currently evaluating the effects adoption of this guidance will have on the consolidated financial statements.

In August 2018, the FASB issued ASU No.

2018-15, Intangibles-Goodwill and Other-Internal-Use Software (“Subtopic 350-40”):

Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license).

For non-public business entities or emerging growth companies, this ASU is effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021, with early adoption permitted.

The Company adopted Subtopic 350-40 on the first day of fiscal 2020, and the adoption of this standard did not have a material impact on the consolidated financial statements.

Topic 326 requires entities to measure the impairment of certain financial instruments, including accounts receivables, based on expected losses rather than incurred losses.

Topic 326 is effective for the Company for fiscal years beginning after December 15, 2022, with early adoption permitted, and will be effective for the Company beginning in fiscal year 2023.

The Company does not expect the adoption of this standard to have a material effect on the Company’s consolidated financial statements or related disclosures.

Utz Brands Holdings, LLC

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The difference between the fair value of the Phantom Units and the fair values of the 2020 LTIP RSUs represents the fair value of the compensation expenses for the post-combination requisite service period for the replacement awards.

Compensation expenses will be recorded evenly during the post-combination requisite service period through the end of fiscal year 2021, which is the cliff vest date of the replacement awards.

Compensation expenses were recorded evenly during the post-combination requisite service period through the end of fiscal year 2021, which is the cliff vest date of the replacement awards.

Refer to Note 11.

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Net identifiable assets acquired 1,192,988

(1) The Company has determined that certain of the acquired trade names included in intangible assets will be amortized over a period of 15 years, and the customer relationships intangible asset will be amortized over a period of 25 years on a straight-line basis commensurate with the acquisition date expectations for the economic value (i.e.

net cash flow generating capability) that is to be provided by the trade names and customer relationships, respectively.

(1) The Company has determined that certain of the acquired trademarks included in intangible assets will be amortized over a period of 15 years, and the customer relationships intangible asset will be amortized over a period of 25 years on a straight-line basis commensurate with the acquisition date expectations for the economic value (i.e.

net cash flow generating capability) that is to be provided by the trademark and customer relationships, respectively.

The fair values allocated to identifiable intangible assets and their estimated useful lives are as follows:

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Indefinite lived trade names $ 355,500 Indefinite

Finite lived trade names 56,000 15

Finite lived trademarks 56,000 15

Customer relationships 443,500 25

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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.

In addition, on December 14, 2020, UQF consummated the purchase and acquisition from OTB Acquisition, LLC of certain intellectual property assets (the “OTB IP” and such purchase and acquisition, the “IP Purchase”) pursuant to an Asset Purchase Agreement, dated November 11, 2020, among UQF, Truco Holdings, LLC and OTB Acquisition, LLC.

The IP Purchase was determined to be an asset acquisition under the provisions of ASC Subtopic 805-50.

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to acquire certain assets of the C.J.

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

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

The Company closed this transaction on February 8, 2021 and the purchase price of approximately $ 25.2 million was funded from current cash-on-hand.

The provisional fair values to which the purchase price was allocated were $ 2.9 million to trademarks, $ 0.8 million to customer relationships, $ 1.7 million to DSD routes, $ 1.9 million of other net assets, and $ 17.9 million to goodwill.

The fair values to which the purchase price was allocated were $ 2.9 million to trademarks, $ 0.8 million to customer relationships, $ 1.7 million to DSD routes, $ 1.9 million of other net assets, and $ 17.9 million to goodwill.

The trademarks and customer relationships are being amortized over a period of 15 years.

As of January 2, 2022, the purchase price allocation has not been finalized.

We expect to finalize the valuation report and complete the purchase price allocation no later than one-year from the acquisition date.

As of February 8, 2022, the purchase price allocation had been finalized.

Festida Foods

On May 11, 2021, the Company announced that its subsidiary, UQF, entered into a definitive agreement with Great Lakes Festida Holdings, Inc.

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

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

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

The following table summarizes the provisional fair values of the assets acquired and liabilities assumed by the Company at the date of the acquisition:

The customer relationships are being amortized over a period of 10 years.

As of June 7, 2022, the purchase price allocation had been finalized.

The following table summarizes the fair values of the assets acquired and liabilities assumed by the Company at the date of the acquisition:

(in thousands)

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The customer relationships are being amortized over a period of 10 years.

As of January 2, 2022, the purchase price allocation has not been finalized.

We expect to finalize the valuation report and complete the purchase price allocation no later than one-year from the acquisition date.

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

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

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

Garcia Co., Inc.

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

(together "RW Garcia"), an artisan maker of high-quality organic tortilla chips, crackers, and corn chips ("RW Garcia acquisition" or the “acquisition of RW Garcia”).

The Company closed on this transaction on December 6, 2021, and the cash purchase price of approximately $ 57.9 million funded in part from a draw on the Company's line of credit and cash on hand.

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

The following table summarizes the provisional fair values of the assets acquired and liabilities assumed by the Company for the RW Garcia acquisition at the date of the acquisition:

The following table summarizes the fair values of the assets acquired and liabilities assumed by the Company for the RW Garcia acquisition at the date of the acquisition:

(in thousands)

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The trade name and customer relationships are being amortized over a period of 15 years.

As of January 2, 2022, the purchase price allocation has not been finalized.

We expect to finalize the valuation report and complete the purchase price allocation no later than one-year from the acquisition date.

The following unaudited pro forma financial information presents the results of operations as if the Business Combination, Truco Acquisition, IP Purchase, HKA Acquisition, Kitchen Cooked Acquisition, the Kennedy Acquisition, the Vitner's Acquisition, the Festida Acquisition.

Garcia Acquisition had occurred on December 30, 2019.

These unaudited pro forma results may not necessarily reflect the actual results of operations that would have been achieved, nor are they necessarily indicative of future results of operations.

The unaudited pro forma information reflects the step-up depreciation and amortization adjustments for the fair value of the assets acquired, the adjustment in interest expense due to the reduction in long term debt as a result of the Business Combination, and the related adjustment to the income tax provision.

In addition, the pro forma net income is not adjusted to exclude transaction expenses and other non-recurring costs.

For the year ended January 2, 2022 For the year ended January 3, 2021

(in thousands) (unaudited) (unaudited)

Pro forma net sales $ 1,219,090 $ 1,252,562

Pro forma net income (loss) $ 10,811 $ ( 6,418 )

Pro forma net income (loss) attributable to controlling interest $ 22,132 $ ( 3,226 )

Pro forma net loss attributable to noncontrolling interest $ ( 11,322 ) $ ( 3,192 )

The purchase price allocation was finalized prior to December 6, 2022.

Inventories consisted of the following:

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Property, plant and equipment, net $ 345,198 $ 303,807

There were no material fixed asset impairments for the fiscal year 2020 or fiscal year 2021.

Depreciation expense was $ 43.1 million for the year ended January 2, 2022, $ 12.4 million and $ 19.0 million for the Successor period from August 29, 2020 to January 3, 2021 and for the Predecessor period from December 30, 2019 to August 28, 2020, respectively, and was $ 23.6 million for the year ended December 29, 2019.

Depreciation expense is classified in cost of goods sold, selling expenses, general and administrative expenses on the consolidated statements of operations and comprehensive income (loss).

On April 28, 2022, certain of the Company's subsidiaries purchased a brand new, recently completed snack food manufacturing facility in Kings Mountain, North Carolina from Evans Food Group Ltd.

d/b/a Benestar Brands and related affiliates.

The total purchase price of the facility was approximately $ 38.4 million, plus assumed liabilities of $ 1.3 million.

The Company paid the full cash purchase price of $ 38.4 million at the closing and concurrently with the facility purchase, the Company sold 2.1 million shares of the Company’s Class A Common Stock for $ 28.0 million, to affiliates of Benestar in a private placement pursuant to Section 4(a)(2) of the Securities Act of 1933.

During the 52 weeks ended January 1, 2023, the Company recorded impairment s totaling $ 2.7 million related to property and equipment damaged in one of the Company's smaller manufacturing facilities by a natural disaster.

The Company has received $ 3.9 million in insurance proceeds related to a partial settlement of damaged property and equipment, resulting in a gain to date of $ 1.2 million.

As a result of the damage to the facility the Company has had to shift production to other facilities as well as utilize a co-manufacturer which has resulted in additional production and distribution costs.

During the 52 weeks ended January 1, 2023 the Company also received $ 6.0 million in proceeds related to a partial settlement of a business interruption insurance claim.

The Company has recognized receipts of the business interruption insurance as a reduction of the cost of goods sold and the receipts related to the damage to property plant and equipment within the (loss) gain on sale of assets, net in the Company's Consolidated Statement of Operations and Comprehensive Income.

The Company continues to negotiate future payments with its insurance provider.

The Company recognizes gains from insurance proceeds, at the earliest, after receipt of insurance proceeds.

There were no material fixed asset impairments for the fiscal year 2021, or for the Successor period from August 29, 2020 to January 3, 2021, nor for the Predecessor period from December 30, 2019 to August 28, 2020.

Depreciation expense was $ 47.8 million for the year ended January 1, 2023, $ 43.1 million for the year ended January 2, 2022, and $ 12.4 million and $ 19.0 million for the Successor period from August 29, 2020 to January 3, 2021 and for the Predecessor period from December 30, 2019 to August 28, 2020, respectively.

Depreciation expense is classified in cost of goods sold, selling, distribution, and administrative expenses on the Consolidated Statements of Operations and Comprehensive Income (loss).

GOODWILL AND INTANGIBLE ASSETS, NET

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Balance as January 2, 2022 915,438

RW Garcia acquisition adjustment ( 143 )

Balance as January 1, 2023 $ 915,295

Intangible assets, net, consisted of the following:

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Intangible assets, net $ 1,099,565 $ 1,142,509

Amortizable trademark intangible assets increased by $ 6.0 million and distributor/customer relationships increased by $ 6.8 million during fiscal year 2021 due to the acquisition of Vitner's, Festida Foods, and RW Garcia.

There were no other changes to intangible assets during the year ended January 2, 2022 other than that which arises from the regular buying and selling of Company owned routes and amortization.

Amortization of the distributor/customer relationships, technology, and trademarks amounted to $ 37.0 million for the year ended January 2, 2022, $ 8.3 million and $ 5.1 million for the Successor period from August 29, 2020 to January 3, 2021 and for the Predecessor period from December 30, 2019 to August 28, 2020, respectively, and was $ 5.7 million for the year ended December 29, 2019.

Previously, the Company was granted certain exclusive distribution rights for certain products manufactured by another manufacturer.

During the 52 weeks ended January 1, 2023, the Company shifted the relationship with that manufacturer and converted that shelf space to Company-branded products.

As a result, the Company recorded impairment expense of $ 2.0 million and the amortizable master distribution rights decreased by $ 2.2 million.

There were no other significant changes to intangible assets during the 52 weeks ended January 1, 2023, other than those which arise from the normal course of business related to the purchase and sale of Company-owned route assets and amortization.

Amortization of the distributor/customer relationships, technology, and trademarks amounted to $ 37.7 million for the year ended January 1, 2023, $ 37.0 million for the year ended January 2, 2022, and $ 8.3 million and $ 5.1 million for the Successor period from August 29, 2020 to January 3, 2021 and for the Predecessor period from December 30, 2019 to August 28, 2020, respectively.

The expense related to the amortization of intangibles is classified in administrative expenses on the Consolidated Statements of Operations and Comprehensive Income.

Amortization expense is classified in administrative expenses on the consolidated statements of operations and comprehensive income (loss).

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The Company has undertaken a program in recent years to sell Company-managed DSD distribution routes to IOs.

Contracts are executed between the Company and the IO for the sale of the product distribution route, including a note in favor of the Company, in certain cases.

Contracts are executed between the Company and the IOs for the sale of the product distribution route, including a note in favor of the Company, in certain cases.

The notes bear interest at rates ranging from 0.00 % to 9.92 % with terms ranging generally from one to ten years .

The notes receivable balances due from IOs at January 1, 2023 and January 2, 2022 totaled $ 22.0 million and $ 27.2 million, respectively, and are collateralized by the routes for which the loans are made.

Of the balance at January 2, 2022 and January 3, 2021, $ 24.8 million and $ 23.1 million, respectively, relates to a corresponding notes payable, as discussed in further detail within “Note 8.

The Company has a corresponding notes payable liability, related to the IOs notes receivables, of $ 21.1 million and $ 24.8 million at January 1, 2023 and January 2, 2022, respectively.

The related notes payable liability is discussed in further detail within Note 8.

"Long-Term Debt."

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Acquisition tax consideration 1,131 5,660

Accrued dividends 4,189 4,261

Accrued dividends and distributions 7,989 4,189

Short term interest rate hedge liability — 4,548

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Supplemental retirement and salary continuation plans 6,512 8,117

Long term portion of an interest rate hedge liability — 2,082

Other long term accrued expenses — 52

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On April 1, 2020, the ABL facility was amended to increase the credit limit up to $ 116.0 million and to extend the maturity through August 22, 2024.

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

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

On September 22, 2022, the ABL facility was amended to further increase the credit limit up to $ 175.0 million, and replaced the interest rate benchmark from LIBOR to SOFR.

As of January 1, 2023 and January 2, 2022, $ 0.0 million and $ 36.0 million, respectively, were outstanding under this facility.

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As of January 1, 2023 and January 2, 2022, $ 163.0 million and $ 96.9 million, respectively, was available for borrowing, net of letters of credit.

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

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

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

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

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

Standby letters of credit in the amount of $ 12.0 million and $ 10.3 million have been issued as of January 1, 2023 and January 2, 2022, respectively.

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

"Acquisitions") an advance payment of principal was made on the First Lien Term Loan of $ 111.6 million, as such no principal payments are due until November 21, 2024.

"Acquisitions") an advance payment of principal was made on the First Lien Term Loan of $ 111.6 million.

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.

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

Deferred fees associated with the term loans under the January 2017 credit agreement were fully expensed during 2017 and other deferred financing fees were derecognized as a result of the Business Combination as described in the Note 1 " Operations and Summary of Significant Accounting Policies" and Note 2.

Deferred fees associated with the term loans under the January 2017 credit agreement were fully expensed during 2017 and other deferred financing fees were derecognized as a result of the Business Combination as described in Note 1 " Operations and Summary of Significant Accounting Policies" and Note 2.

"Acquisitions".

On October 1, 2019, the Company repaid the Second Lien Term Loan with the proceeds of the sale of preferred and common units by Series U, Series R, and SRS.

On October 1, 2019, the Company repaid the Second Lien Term Loan with the proceeds of the sale of preferred and common units by Series U, Series R, and SRS Leasing LLC, which together with its subsidiaries, were companies formed to acquire, hold and lease real estate to UQF prior to its merger into UQF on December 30, 2019.

The Company accounted for the repayment of the Second Lien Term Loan as a debt extinguishment as the investors who purchased the preferred units and common units were not parties to the Second Lien Term Loan.

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(the "Bridge Credit Agreement”).

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

As of January 3, 2021, the outstanding balance of the Bridge Credit Agreement was $ 370.0 million, with $ 120.0 million being repaid from the redemption of the Company's warrants.

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

("Truco" and such acquisition, the "Truco Acquisition") and certain intellectual property from OTB Acquisition, LLC (the "IP Purchase").

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

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

As of January 3, 2021, the outstanding balance of the Bridge Credit Agreement was $ 370.0 million, with $ 120.0 million being repaid from the exercise of the Company's warrants.

Commitment fees and deferred financing costs on the Bridge Credit Agreement totaled $ 7.2 million, of which $ 2.6 million remained on the books as of January 3, 2021.

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In connection with Amendment No.

2 to the Credit Agreement, and a $ 12.0 million repayment in the first quarter of 2021, the outstanding balance of $ 370.0 million was repaid in full and the Bridge Credit Agreement was terminated.

2 (as defined below), and a $ 12.0 million repayment in the first quarter of 2021, the outstanding balance of $ 370.0 million was repaid in full and the Bridge Credit Agreement was terminated.

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

2 to the Credit Agreement ("Amendment No.

2 to the Bridge Credit Agreement ("Amendment No.

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

Pursuant to the terms of Amendment No.

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

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

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

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

3 to the Credit Agreement ("Amendment No.

3 to the Bridge Credit Agreement ("Amendment No.

Pursuant to the terms of Amendment No.

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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.

On October 12, 2022, the Company, through its subsidiaries UQF, Kennedy and Condor Snack Foods, LLC (together with UQF and Kennedy, the “Real Estate Financing Borrowers”), entered into a loan agreement (the “Real Estate Term Loan”) with City National Bank which was secured by a majority of the Real Estate Financing Borrowers’ real estate assets.

The Real Estate Term Loan holds a principle balance of $ 88.1 million, with net proceeds of approximately $ 85.0 million after transaction fees and expenses.

The Real Estate Term Loan has a ten-year maturity and amortizes approximately $ 3.5 million in principal annually, with a balloon payment due at maturity.

The Company used a portion of the proceeds from the Real Estate Term Loan to pay off the ABL facility.

The Real Estate Term Loan contains a single financial maintenance covenant consisting of a fixed charge coverage ratio that is tested quarterly only during a covenant trigger period consistent with the existing ABL facility.

Concurrent with the closing of the Real Estate Term Loan, UQF entered into an interest rate swap transaction to fix the effective interest rate at approximately 5.929 %, as discussed in further detail within "Note 9.

Derivative Financial Instruments and Purchase Commitments”.

The Term Loan B and the ABL facility are collateralized by substantially all of the assets and liabilities of UBH and its subsidiaries excluding the real estate assets secured by the Real Estate Term Loan, including equity interests in certain of UBH’s subsidiaries.

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

UBH and its subsidiaries were in compliance with its financial covenant as of January 2, 2022.

UBH and its subsidiaries were in compliance with its financial covenants as of January 1, 2023.

Long-term debt consisted of the following:

Debt (in thousands)

Issue Date Principal Balance Interest Rate Maturity Date January 2, 2022 January 3, 2021

Term loan B June-21 $ 795,000 3.09 % January-28 $ 787,236 $ —

First lien term loan credit agreement November-17 535,000 3.64 % November-24 — 404,650

Second lien term loan credit agreement November-17 125,000 6.25 % November-24 — 5,350

Bridge credit agreement December-20 490,000 4.40 % December-25 — 370,000

Issue Date Principal Balance Maturity Date January 1, 2023 January 2, 2022

Term loan B (1)

June-21 $ 795,000 January-28 $ 779,286 $ 787,236

Real Estate Loan 88,140 —

Equipment loans (2)

54,053 25,958

Miscellaneous equipment loans — 697

Revolving credit facility 36,000 —

ABL facility (3)

Net impact of debt issuance costs and original issue discounts ( 9,672 ) ( 7,929 )

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Long term portion of term debt and financing obligations $ 893,335 $ 830,548

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

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

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

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

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

Amounts outstanding under term debt and financing obligations consisted of the following:

(1) On September 22, 2022, the Company entered into Amendment No.

4 to the Bridge Credit Agreement ("Amendment No.

4"), which replaced the interest rate benchmark from LIBOR to SOFR.

The weighted average interest rate on the Term Loan B debt for the 52 weeks ended January 1, 2023 and the 52 weeks ended January 2, 2022 was 4.93 % and 3.24 %, respectively.

(2) In July 2021, the Company entered into two separate finance lease obligations with Banc of America Leasing & Capital, LLC, which have been treated as secured borrowing.

The Company has made a series of draws upon these agreements throughout fiscal year 2021 totaling $ 26.5 million and has drawn a total of $ 32.4 million in fiscal year 2022.

These draws bear interest ranging from 3.26 % through 5.77 % and have varying maturities up through 2028.

(3) The facility bore interest at an annual rate based on LIBOR, or SOFR plus a 0.10 % credit spread adjustment after the amendment on September 22, 2022, 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 %).

The Company generally utilizes the prime rate for amounts that the Company expects to pay down within 30 days, the interest rate on the facility as of January 1, 2023 and January 2, 2022, was 8.25 % and 3.75 %, respectively, under the prime rate.

The Company elects to use the LIBOR, prior to the amendment on September 22, 2022 which changed the reference rate to SOFR as described above, for balances that are expected to be carried longer than 30 days, the interest rate on the ABL facility as of January 1, 2023 was 6.17 %.

As of January 1, 2023, the minimum debt repayments under term debt and financing obligations consisted of the following:

(in thousands)

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Warrants” and the Tax Receivable Agreement described in "Note 2.

Acquisitions” and cash or cash equivalent of $ 5.3 million held at UBI as of fiscal year end 2021.

The cash on hand is primarily the result of distributions from UBH and is primarily used to pay dividends to shareholders and make tax payments.

Other Notes Payable and Finance Leases

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

Additionally, during the first fiscal quarter of 2020, the Company purchased intellectual property that include a deferred purchase price of $ 0.5 million, of which $ 0.4 million and $ 0.5 million was outstanding as of January 2, 2022 and January 3, 2021, respectively.

Acquisitions” and accrued dividends to shareholders which flow out of UBH.

Other Notes Payable and Capital Leases

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

These transactions were accounted for as contract terminations and asset purchases and resulted in expense of $ 23.0 million for the 52 weeks ended January 1, 2023.

The outstanding payable balance of these transactions was $ 0.5 million as of January 1, 2023.

During the first fiscal quarter of 2020, the Company purchased intellectual property that include a deferred purchase price of $ 0.5 million, of which $ 0.3 million and $ 0.4 million was outstanding as of January 1, 2023 and January 2, 2022, respectively.

During the third quarter of 2021, the Company recorded liabilities related primarily to reclaiming distribution rights from distributors, of which $ 1.3 million was outstanding as of January 2, 2022.

There was no balance outstanding as of January 1, 2023.

Amounts outstanding under notes payable consisted of the following:

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Leases” for further discussion on our finance lease obligations.

During fiscal 2019, the Company sold $ 33.2 million of notes receivable from IOs on its books for $ 34.1 million in a series of transactions to a financial institution.

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

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

During fiscal year 2019, the Company sold $ 33.2 million of notes receivable from IOs on its books for $ 34.1 million in a series of transactions to a financial institution.

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

During fiscal year 2022, the Company sold an additional $ 5.0 million of notes receivable from IOs on its books for $ 5.0 million to a financial institution.

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

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

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

The underlying notes have various maturity dates through April 2030.

The underlying notes have various maturity dates through June 2032.

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

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Successor Predecessor

(in thousands) Year Ended January 2, 2022 From

(in thousands) For the Fiscal Year Ended January 1, 2023 For the Fiscal Year Ended January 2, 2022 From

August 29, 2020

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December 30, 2019

August 28, 2020 Year Ended December 29, 2019

August 28, 2020

Company’s ABL facility and other long-term debt $ 41,231 $ 29,270 $ 7,911 $ 23,350

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

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

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

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

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

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

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

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

Effective on September 30, 2022 the Company amended the swap contract to reference the 1-month SOFR plus a credit spread adjustment (“CSA”) of 11.448 basis points, as well as setting the new fixed rate to 1.408 %;

under this amended swap agreement the Company will receive a series of payments based on the greater of SOFR plus CSA, or 0.00 %.

On October 12, 2022 and effective on November 1, 2022, the Company entered into a 10 -year swap contract, with an effective date of November 1, 2022, with a counter-party to make a series of payments based on a fixed interest rate of 3.829 % and receive a series of payments based on the greater of the 1-month SOFR or 0.00 %.

The agreement covers $ 88.1 million as of January 1, 2023.

This swap effectively fixes the rate of the Real Estate Term Loan to 5.929 %.

The balance that the hedge covers is designed to abate as principle payments on the Real Estate Term Loan are made.

The Company entered into these transactions to reduce its exposure to changes in cash flows associated with the Real Estate Term Loan and has designated this derivative as a cash flow hedge.

At January 1, 2023, the effective fixed interest rate on the long-term debt hedged by these contracts was 5.5 %.

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

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"Warrants" for additional information on our warrant liabilities.

A reconciliation of the changes in the warrant liability for the year ended January 2, 2022 is as follows:

A reconciliation of the changes in the warrant liability during the year ended January 1, 2023 is as follows:

(in thousands)

Fair value of warrant liabilities as of January 2, 2022 $ 46,224

Reclassification of warrant liability to equity for exercised or cancelled warrants ( 54,713 )

Gain on remeasurement of warrant liability ( 720 )

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

The Company has recorded purchase commitment gain (losses) totaling $ 2.8 million for the year ended January 2, 2022, $ 0.9 million and $( 0.7 ) million for the Successor period from August 29, 2020 to January 3, 2021 and for the Predecessor period from December 30, 2019 to August 28, 2020, respectively, and $ 0.9 million for the year ended December 29, 2019, respectively.

The Company has recorded purchase commitment gains (losses) totaling $ 0.0 million for the year ended January 1, 2023, $ 1.0 million for the year ended January 2, 2022, and $ 0.9 million and $( 0.7 ) million for the Successor period from August 29, 2020 to January 3, 2021 and for the Predecessor period from December 30, 2019 to August 28, 2020, respectively .

FAIR VALUE MEASUREMENTS

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To the extent that valuation is based on inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment.

The fair values of the Company’s Level II derivative instruments were determined using valuation models that use market observable inputs including interest rate curves and both forward and spot prices for commodities.

Derivative assets and liabilities included in Level II primarily represent commodity and interest rate swap contracts.

The fair values of the Company’s Level 2 derivative instruments were determined using valuation models that use market observable inputs including interest rate curves and both forward and spot prices for commodities.

Derivative assets and liabilities included in Level 2 primarily represent commodity and interest rate swap contracts.

The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis based upon the level within the fair value hierarchy in which the fair value measurements fall, as of January 1, 2023:

(in thousands) Level I Level II Level III Total

(in thousands) Level 1 Level 2 Level 3 Total

Cash and cash equivalents $ 72,930 $ — $ — $ 72,930

Interest rate swaps — 2,208 — 2,208

Total assets $ 41,898 $ 2,208 $ — $ 44,106

Commodity contracts — 1,586 — 1,586

Interest rate swaps — 45,088 — 45,088

Total assets $ 72,930 $ 46,674 $ — $ 119,604

Private placement warrants $ — $ 45,504 $ — $ 45,504

Debt — 911,807 — 911,807

3 unchanged sentences

Cash and cash equivalents $ 41,898 $ — $ — $ 41,898

Interest rate swaps — 2,208 — 2,208

Total assets $ 41,898 $ 2,208 $ — $ 44,106

1 unchanged sentence

Interest rate swaps — 4,600 — 4,600

Public warrants 52,580 — — 52,580

Private placement warrants — 46,224 — 46,224

2 unchanged sentences

SHARE-BASED COMPENSATION

For the periods presented, compensation expense included in selling and general and administrative expense for all types of stock-based compensation programs and the related income tax benefit recognized were as follows:

For the periods presented, compensation expense included primarily in selling, distribution, and administrative expense for all types of stock-based compensation programs and the related income tax benefit recognized were as follows:

Successor Predecessor

(in thousands) Year Ended January 2, 2022 From

(in thousands) Year Ended January 1, 2023 Year Ended January 2, 2022 From

August 29, 2020

1 unchanged sentence

December 30, 2019

August 28, 2020 Year Ended December 29, 2019

August 28, 2020

RSUs $ 5,136 $ 8,574 $ 6,176 $ —

2 unchanged sentences

Pre-tax compensation expense 8,445 $ 10,295 $ 6,790 $ —

The tax benefit recognized from the share-based compensation expense is immaterial.

Related income tax benefit ( 3,452 )

Impact to net income $ 4,993

The tax benefit recognized from the share-based compensation expense is nominal prior to the year ended January 1, 2023 due to a full valuation allowance.

Unrecognized compensation expense related to nonvested share-based compensation grants was as follows:

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The 2020 LTIP RSUs are equity-classified due to settlement being in shares.

As a result of the Business Combination, the Company converted the Phantom Units under the 2018 LTIP into 2020 LTIP RSUs, which may settle into up to 1,479,445 shares of Class A Common Stock plus such number of shares the Company may deliver, in its discretion, to satisfy certain gross-up obligations, under the 2020 LTIP at a fair value of $ 16.34 per unit to holders of the Phantom Units.

As a result of the Business Combination, the Company converted the Phantom Units under the 2018 LTIP into 2020 LTIP RSUs, which settled into 1,479,445 shares of Class A Common Stock.

The fair value of the Phantom Units being replaced was approximately $ 11.2 million at the Closing, which was attributable to the pre-combination service period and was included in the purchase price of the Business Combination.

The fair value of the 2020 LTIP RSUs at the Closing of the Business Combination in excess of the fair value of the replaced Phantom Units attributable to the pre-combination period was approximately $ 13.9 million and is attributable to the post-combination requisite service period.

All 2020 LTIP RSUs settled January 3, 2022.

Restricted Share Units

Under the 2020 Plan, the Company granted certain employees and directors RSUs as a result of their significant contributions.

These grants will settle upon vesting into shares of the Company’s Class A Common Stock, subject to continued employment.

The Initial Grant RSUs for directors will vest on May 6, 2021, while the Initial Grant RSUs for certain employees will vest in equal installments on December 31, 2022 and December 31, 2023.

In conjunction with the vesting of the Initial Grant RSUs, the Company granted additional RSUs to directors that will vest on May 5, 2022.

Subject to the vesting of such awards, the RSUs participated in dividends of the Company beginning with the fiscal 2020 end-of-year dividend declaration, which was paid out in the first quarter of fiscal year 2021.

Under the Utz Brands, Inc.

2020 Omnibus Equity Incentive Plan (as amended, the “2020 Plan”), the Company grants restricted stock units (“RSUs” representing the right to receive one share of the Company’s Class A Common Stock upon vesting, provided that the recipient remains employed with the Company through the vesting and subject to certain forfeiture conditions and restrictions.

The RSUs vest according to specific vesting conditions set forth in the RSU award agreements.

RSUs that become vested also generally entitle the holder to be credited with dividend equivalent payments in cash, with such dividend equivalents payable when, and to the extent, the RSUs are settled (or such accrued dividend equivalents will be forfeited to the extent the RSUs are forfeited).

Performance Share Units

The Company issued PSUs as part of the 2020 Plan, which settle into shares of the Company’s Class A Common Stock subject to the continued employment of the grantees and achievement of certain performance criteria, provided that the issuance of the PSUs was contingent upon the Company filing a Form S-8 with the SEC, which occurred on November 2, 2020.

The number of PSUs that will vest is determined by the Company’s Class A Common Stock achieving a certain Total Shareholder Return (“TSR”) for the Company, relative to the TSR of a specified peer group.

Depending on the Company’s TSR relative to the peer group TSR, the actual number of shares that will be vested can range from zero and up to 200 % of the initial grant.

The awards will vest 50 % on December 31, 2022 and 50 % on December 31, 2023, subject to the market condition described above.

Subject to the vesting of such awards, the PSUs will participate in dividends of the Company beginning with the fiscal 2020 end-of-year dividend declaration, which was paid out in the first quarter of fiscal year 2021.

Since the PSUs vest based on market conditions, a Monte Carlo simulation model was used to determine the grant-date fair value of the PSUs.

The assumptions used in the Monte Carlo simulation model included a weighted average expected term of 2.8 years, weighted average expected volatility of 53.6 %, and weighted average risk-free rate of 0.2 %.

The Company issues performance share units (“PSUs”) under the 2020 Plan, which provide the participant with the opportunity to earn shares of the Company’s Class A Common Stock if the Company achieves certain performance goals determined by the administrator of the 2020 Plan.

All PSUs granted since the adoption of the 2020 Plan contain vesting based on the Company’s performance with respect to relative total stockholder return.

The number of shares subject to the PSUs that vest and are settled at the end of each performance period is based on the Company’s cumulative total stockholder return relative to the total stockholder returns of members of a peer group, which is typically consistent with the peer group used for compensation disclosures.

At the end of the performance period, the Company’s total stockholder return position is ranked relative to the total stockholder returns of each member of the performance peer group.

The Company’s performance is measured against the companies in the performance peer group that remain within the performance peer group for the entire performance period.

The total number of PSUs that vest is based on the ranking of the Company’s total stockholder return relative to the total stockholder return of each of the Company’s peer companies, and ranges from a 200 % payout for ranking in the 90th percentile or above to 0 % payout for ranking below the 30th percentile with percentiles interpolated between these payouts.

PSUs that become vested also generally entitle the holder to be credited with dividend equivalent payments in cash, with such dividend equivalents payable when, and to the extent, the PSUs are settled (or such accrued dividend equivalents will be forfeited to the extent the PSUs are forfeited).

Because the PSUs vest based on market conditions, Monte Carlo simulation models were used to determine the grant-date fair value of the PSUs.

The assumptions used in the Monte Carlo simulation models included weighted average expected terms ranging from 2.8 years to 3.0 years, weighted average expected volatility ranging from 40.0 % to 53.6 %, and weighted average risk-free rates ranging from 0.2 % to 3.9 %.

Performance Stock Units and Restricted Stock Units Number of Units Weighted-average grant date fair value for equity awards (per unit) Weighted Average Remaining Contractual Term

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Stock Options

The Company granted its Executive Leadership Team stock options exercisable for Class A Common Stock of the Company, provided that the exercise of such stock options was contingent upon the Company filing a Form S-8 with the SEC, which occurred on November 2, 2020.

Subject to continued employment, 50% of these options will vest on December 31, 2022 and 50% on December 31, 2023.

The Company granted 286,268 stock options on August 28, 2020 and the exercise price of the options is the Company’s closing share price of $ 16.34 on August 28, 2020.

The stock options have a maximum contractual life of 10 years from the grant date.

No options were exercised or forfeited during the Successor period, and no stock options were granted prior to the Business Combination.

The Company granted its Executive Leadership Team non-qualified stock options exercisable for Class A Common Stock of the Company, provided that the exercise of such stock options was contingent upon the Company filing a Form S-8 with the SEC, which occurred on November 2, 2020.

For non-cash, stock-based awards exchanged for employee services, the Company measures stock-based compensation on the grant date, based on the fair value of the award, and recognizes expense over the requisite service period, which for the Company is generally the vesting period.

To estimate the fair value of an award, the Company uses the Black-Scholes pricing model.

This model requires inputs such as expected term, expected volatility and risk-free interest rate.

These inputs are subjective and generally require significant analysis and judgment to develop.

For all grants during fiscal year 2022 and the Successor period between August 28, 2020 through January 3, 2021, the Company calculated the expected term based on the simplified method as allowable under ASC 718 due to a lack of sufficient trading history for the Company’s Class A Common Stock.

The use of this method effectively assumes that exercise occurs evenly over the period from vesting until expiration, and therefore the expected term is the midpoint between the service period and the contractual term of the award.

The Company estimates the volatility of its Class A Common Stock by analyzing its historical volatility and considering volatility data of its peer group and their implied volatility.

The Company recognizes forfeitures when they occur.

Options issued under the 2020 Plan generally have a maximum contractual life of 10 years from the grant date and must be issued with an exercise price equal to or greater than the fair market value of the shares of Class A Common Stock on the date of grant, as determined by the administrator of the 2020 Plan.

Subject to continued employment, 50 % of these options vested on December 31, 2022 and 50 % will vest on December 31, 2023.

The Company granted stock options with an aggregate of 286,268 shares of Class A Common Stock underlying such options on August 28, 2020 and the exercise price per share of the options was determined to be the Company’s closing share price of $ 16.34 on August 28, 2020, pursuant to the terms of the 2020 Plan.

The fair value of each stock option granted was determined to be $ 7.38 using the Black-Scholes Option Pricing Model based on an expected volatility of 46.8 %, expected option term of approximately 6.4 years, and risk-free rate of return of 0.4 %.

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Treasury zero-coupon issues with an equivalent remaining term.

The expected option term was determined based on the simplified method as allowable under ASC 718 due to a lack of sufficient trading history for the Company’s common stock.

On January 31, 2022, the Company granted its Executive Leadership Team stock options exercisable for Class A Common Stock of the Company.

Subject to continued employment, 100 % of these options will vest and become exercisable on December 31, 2024.

The Company granted stock options with an aggregate of 377,550 shares of Class A Common Stock underlying such options, on January 31, 2022 and the exercise price of these options is the Company’s closing share price of $ 15.51 on January 31, 2022.

The fair value of each stock option granted was determined to be $ 6.06 using the Black-Scholes Option Pricing Model based on an expected volatility of 40.0 %, expected option term of approximately 6.4 years, and risk-free rate of return of 1.4 %.

The risk-free rates are based on the implied yield available on U.S.

Treasury zero-coupon issues with an equivalent remaining term.

In May 2022, an additional 16,923 awards were granted.

Stock Options Number of Units Weighted-Average Grant Date Fair Value for Equity Awards (per unit) Weighted Average Remaining Contractual Term Aggregate Intrinsic Value (1)

Outstanding at beginning of year 286,268 $ 5.97 2.3 Years

Granted 394,473 6.01

Vested ( 127,727 ) —

Forfeited ( 30,811 ) 6.11

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The ESPP was effective January 1, 2021, and purchase rights may be granted under the ESPP prior to stockholder approval, but no purchase rights may be exercised unless and until stockholder approval is obtained.

The maximum number of shares of the Company’s Class A Common Stock available for sale under the ESPP shall not exceed in the aggregate 1,500,000 shares, and may be unissued shares or treasury shares or shares bought on the market for purposes of the ESPP.

Under the ESPP, employees are offered the option to purchase discounted shares of Class A Common Stock during offering periods designated by the administrator.

Under the ESPP, associates are offered the option to purchase discounted shares of Class A Common Stock during offering periods designated by the administrator.

Each offering period will be one year , consisting of two six-month purchase periods, commencing on each January 1 and July 1 following the effective date of the ESPP.

The initial offering under the ESPP will commence on January 1, 2021 and end on December 31, 2021.

Shares are purchased on the applicable exercise dates, which is the last trading day of each purchase period with initial purchase dates of June 30, 2021 and December 31, 2021.

The purchase price will be 90 % of the lower of (i) the fair market value of the stock on the date of enrollment and (ii) the fair market value of the stock on the last day of the related purchase period.

As of January 30, 2021, 7.7 million shares of Class A common stock were available for issuance under the ESPP, and employee contributions had not yet commenced.

Shares are purchased on the applicable exercise dates, which is the last trading day of each purchase period.

The ESPP permits participants to purchase the Company’s Class A Common Stock at a purchase price not less than 85 % of the lesser of (i) the “fair market value” of a share on the first day of a purchase period, rounded up to the nearest whole cent per share and (ii) the “fair market value” of a share on the purchase date of such purchase period, rounded up to the nearest whole cent per share, subject to limits set by the Internal Revenue Code of 1986, as amended (the “Code”) and the ESPP.

The purchase price used was 90 % in 2021 and 92.5 % in 2022.

As of January 10, 2022, 1,233,310 shares of Class A common stock remain available for issuance under the ESPP.

For the year ended January 1, 2023, the Company granted 138,096 shares with a fair value of $ 2.0 million, and the Company recognized compensation expense of $ 0.4 million.

For the year ended January 2, 2022, the Company granted 128,642 shares with a fair value of $ 2.7 million, and the Company recognized compensation expense of $ 0.5 million.

CONTINGENCIES

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The Company received an assessment from the Commonwealth of Pennsylvania pursuant to a sales and use tax audit for the period from January 1, 2014 through December 31, 2016.

As of January 2, 2022 and January 3, 2021, the Company had a reserve of $ 1.3 million to cover the assessment.

As of January 2, 2022, the Company had a reserve of $ 1.3 million to cover the assessment.

On January 7, 2022, the Company settled a tax audit with the Commonwealth of Pennsylvania pursuant to which the Company paid the Commonwealth of Pennsylvania $ 0.9 million.

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

The outstanding balance of loans guaranteed was $ 2.2 million and $ 4.1 million at January 2, 2022 and January 3, 2021, respectively, which are accounted for as an off balance sheet arrangement.

The outstanding balance of loans guaranteed was $ 1.5 million and $ 2.2 million at January 1, 2023 and January 2, 2022, respectively, all of which was recorded by the Company as off balance sheet arrangements.

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

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As discussed in "Note 8.

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

Long-Term Debt”, the Company also sold notes receivable on its books to Bank of America during fiscal year 2019, fiscal year 2021, and fiscal year 2022, which the Company partially guarantees.

The outstanding balance of notes purchased by Bank of America at January 1, 2023 and January 2, 2022 was $ 17.9 million and $ 19.7 million, respectively.

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

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

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

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

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

3 unchanged sentences

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

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

The outstanding balance of loans guaranteed was $ 3.4 million and $ 4.9 million at January 1, 2023 and January 2, 2022, respectively, all of which were included in the Company's Consolidated Balance Sheets.

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

5 unchanged sentences

The audit consists of three components including accounts payable, payroll, and accounts receivable customer over-payments.

The Company estimates that the potential liability for the accounts payable and payroll components is approximately $ 0.2 million, which has been included in the other accrued expenses section of the balance sheet as of January 2, 2022 and January 3, 2021.

As of the date of these financial statements, the Company is not able to reasonably estimate the potential liability for the accounts receivable customer over-payments.

The Company recorded accruals of $ 0.1 million and $ 0.2 million which have been included in the other accrued expenses section of the balance sheet as of January 1, 2023 and January 2, 2022 to cover the estimated assessment.

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

9 unchanged sentences

Balance as of January 2, 2022 3,715

Unrealized gain on cash flow hedges 47,279

Balance as of January 1, 2023 50,994

Less balance attributable to noncontrolling interest as of January 1, 2023 ( 20,217 )

Balance attributable to controlling interest as of January 1, 2023 $ 30,777

(in thousands) Loss on

4 unchanged sentences

SUPPLEMENTARY CASH FLOW INFORMATION

Cash paid for interest was $ 31.6 million for the year ended January 2, 2022, $ 9.2 million and $ 28.8 million for the Successor period from August 29, 2020 to January 3, 2021 and for the Predecessor period from December 30, 2019 to August 28, 2020, respectively, and was $ 45.7 million for the year ended December 29, 2019.

Refunds related to income related taxes were $ 0.7 million for the year ended January 2, 2022, $ 0.1 million and $ 0.2 million for the Successor period from August 29, 2020 to January 3, 2021 and for the Predecessor period from December 30, 2019 to August 28, 2020, respectively, and was $ 0.1 million for the year ended December 29, 2019.

Payments made for income-related taxes were $ 3.7 million for the year ended January 2, 2022, $ 0.5 million and $ 0.5 million for the Successor period from August 29, 2020 to January 3, 2021 and for the Predecessor period from December 30, 2019 to August 28, 2020, respectively, and was $ 1.7 million for the year ended December 29, 2019.

The following non cash considerations were part of the Business Combination Agreement with CC H:

Continuing Members' retained restricted units totaling $ 54.1 million, TRA totaling $ 25.3 million, and LTIP RSU awards totaling $ 11.2 million .

Dividends declared but not paid were $ 4.2 million and $ 4.3 million as of January 2, 2022 and January 3, 2021, respectively, and are included within the "accrued expense and other" of the Consolidated Balance Sheet.

(in thousands) Year Ended January 1, 2023 Year Ended January 2, 2022 From

August 29, 2020

January 3, 2021 From

December 30, 2019

August 28, 2020

Cash paid for interest $ 41,711 $ 31,638 $ 9,200 $ 28,800

Refunds related to income taxes $ 4,663 $ 726 $ 118 $ 200

Payments for income taxes $ 6,988 $ 3,653 $ 528 $ 500

The Company is subject to federal and state income taxes with respect to our allocable share of any taxable income or loss of Utz Brands Holdings, LLC, as well as any standalone income or loss the Company generates.

5 unchanged sentences

The Company anticipates this structure to remain in existence for the foreseeable future.

The provision (benefit) for income taxes was as follows:

The (benefit) provision for income taxes was as follows:

Successor Predecessor

(in thousands) Year Ended January 2, 2022 From

(in thousands)

Year Ended January 1, 2023 Year Ended January 2, 2022 From

August 29, 2020

1 unchanged sentence

December 30, 2019

August 28, 2020 Year Ended December 29, 2019

August 28, 2020

Federal $ 4,038 $ 1,553 $ — $ —

5 unchanged sentences

Total $ ( 23,919 ) $ 8,086 $ ( 267 ) $ 3,973

A reconciliation of the expected statutory federal tax and the total income tax expense (benefit) was as follows:

A reconciliation of the expected statutory federal tax and the total income tax (benefit) expense was as follows:

Successor Predecessor

(in thousands) Year Ended January 2, 2022 From

(in thousands) Year Ended January 1, 2023 Year Ended January 2, 2022 From

August 29, 2020

1 unchanged sentence

December 30, 2019

August 28, 2020 Year Ended December 29, 2019

August 28, 2020

Federal statutory rate (21%) $ ( 7,972 ) $ 3,378 $ ( 22,715 ) $ 1,552

36 unchanged sentences

Net deferred tax liabilities $ ( 124,802 ) $ ( 136,334 )

On March 27, 2020, the U.S.

federal government enacted the Coronavirus Aid, Relief and Economic Security Act (the CARES Act) and on December 27, 2020 enacted the Consolidated Appropriations Act, 2021, neither of which had a material impact on our provision for income taxes.

As of January 1, 2023, the Company recorded an additional deferred tax liability of $ 18.1 million related to the outside book basis of the Company’s investment in Utz Brands Holdings, LLC.

federal government enacted the Coronavirus Aid, Relief and Economic Security Act (the CARES Act) on March 27, 2020, the Consolidated Appropriations Act, 2021 on December 27, 2020, and the Inflation Reduction Act of 2022 on August 16, 2022, none of which had a material impact on our provision for income taxes.

Net Operating Loss and Tax Credit Carryforward

2 unchanged sentences

As of January 1, 2023 and January 2, 2022, the Company and certain subsidiaries also have state NOL carryforwards in the amount of $ 45.9 million and $ 75.9 million, respectively.

The state NOL carryforwards begin to expire in 2021, however, some state NOL's are able to be carried forward indefinitely.

The state NOL carryforwards continue to expire in 2022, however, some state NOL's are able to be carried forward indefinitely.

As of January 1, 2023 and January 2, 2022, the Company and certain subsidiaries have federal tax credit carryforwards in the amount of $ 0.4 million and $ 0.2 million, respectively.

As of January 2, 2022 and January 3, 2021, certain subsidiaries have state tax credit carryforwards in the amount of $ 0.0 million and $ 0.1 million, respectively.

As of January 1, 2023 and January 2, 2022, certain subsidiaries have nominal state tax credit carryforwards.

Utilization of some of the federal and state net operating loss and credit carryforwards are subject to annual limitations due to the "change in ownership” provisions of the Internal Revenue Code and similar state provisions.

5 unchanged sentences

Such objective evidence limits the ability to consider other subjective evidence, such as projections for future growth.

The Company determined that there is uncertainty regarding the utilization of certain DTA's such as the investment in Utz Brands Holdings, LLC, federal operating losses subject to annual limitations due to “change in ownership” provisions, and state net operating losses where the Company does not expect to continue to have nexus.

The Company determined that there is uncertainty regarding the utilization of certain DTA's such as some of the investment in Utz Brands Holdings, LLC, federal operating losses subject to annual limitations due to "change in ownership” provisions, and state net operating losses where the Company does not expect to continue to have nexus.

Therefore, a valuation allowance has been recorded against the DTA's for which it is more-likely-than-not they will not be realized.

2 unchanged sentences

The Company has no intention of disposing of or liquidating the partnership and therefore has not considered the indefinite lived DTL as a source of income to offset other DTA’s.

In weighing positive and negative evidence, both objective and subjective, including its three-year cumulative loss, the Company has recorded a valuation allowance against its DTA’s related to net operating losses and deductible book/tax differences and recorded a DTL primarily related to the book over tax basis in the investment in the partnership that will not reverse in the ordinary course of operations.

In weighing positive and negative evidence, both objective and subjective, including its three-year cumulative loss and the ability to offset DTA’s with definite lived DTL’s, the Company has recorded a valuation allowance against its DTA’s related to net operating losses and deductible book/tax differences and recorded a DTL primarily related to the book over tax basis in the investment in the partnership that will not reverse in the ordinary course of operations.

The Company considered that an indefinite lived DTL may be considered as a source of taxable income for an indefinite lived DTA;

however, given our indefinite lived DTL will only reverse upon sale or liquidation, the Company determined that it was more appropriate to record a valuation allowance against its DTA’s.

however, given our indefinite lived DTL will only reverse upon sale or liquidation, the Company determined that it was more appropriate to record a valuation allowance against a portion of its DTA’s.

The amount of DTA considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as projections for growth.

The net change in valuation allowance of $ 11.0 million was recorded as an increase to income tax expense for $ 5.2 million offset and an adjustment to increase equity for $ 5.8 million as it related to the direct tax effect of changes in tax basis in the investment in Utz Brands Holdings, LLC.

The net change in valuation allowance of $ 16.2 million was recorded as a decrease to income tax expense for $ 17.2 million offset and an adjustment to equity for $ 1.0 million.

As of each reporting date, the Company considers new evidence, both positive and negative, that could affect the future realization of DTA’s.

The Company considered the objectively verifiable financial performance in the second half of 2022, while neither relying on projections of income nor incorporating them into the scheduling exercise for the reversal of existing taxable temporary differences.

The scheduling exercise concludes that it is more likely than not that a future tax benefit will be realized on DTA’s recorded for the Company’s operational investment in UBH, federal and state NOL’s, and other deferred tax assets to the extent of the income from reversing taxable temporary differences.

Accordingly, the Company recorded a net valuation release of $ 15.6 million in January 1, 2023.

The remaining valuation allowance release of $ 0.6 million as of January 1, 2023 relates to subsidiary federal and state NOL’s, and credits.

As of January 1, 2023, tax years 2019 through 2022 remain open and subject to examination by the Internal Revenue Service and the majority of the states where the Company has nexus, and tax years 2018 through 2022 remain open and subject to examination in selected states that have a four year statute of limitations.

4 unchanged sentences

Pursuant to an election under section 754 of the Internal Revenue Code, the Company obtained an increase in its share of the tax basis in the net assets of UBH when it was deemed to purchase UBH units from the UPA Seller and purchased UBH units from the Continuing Members per the Business Combination.

The Continuing Members have the option to exchange UBH units for UBI common stock post-Business Combination.

The Continuing Members have the option to exchange UBH units along with the forfeiture of a corresponding number of Class V Common Stock of the Company for UBI common stock post-Business Combination.

The Company intends to treat any such exchanges as direct purchases for U.S.

2 unchanged sentences

They may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.

Pursuant to the Business Combination Agreement, the Company entered into the TRA, which provides for the payment by the Company of 85% of the amount of any tax benefits realized as a result of (i) increases in the share of the tax basis in the net assets of UBH resulting from the Business Combination and any future exchanges by the Continuing Members of UBH units for UBI common stock;

Pursuant to the Business Combination Agreement, the Company entered into the Tax Receivable Agreement in connection with the Business Combination (the “Tax Receivable Agreement” or “TRA”), which provides for the payment by the Company of 85% of the amount of any tax benefits realized as a result of (i) increases in the share of the tax basis in the net assets of UBH resulting from the Business Combination and any future exchanges by the Continuing Members of UBH units for UBI common stock;

(ii) tax basis increases attributable to payments made under the TRA;

and (iii) tax amortization deductions attributable to the acquisition of Kennedy and the election to treat the transaction as an asset deal for tax purposes (the "TRA Payments").

and (iii) tax amortization deductions attributable to the acquisition of Kennedy Endeavors, LLC and the election to treat the transaction as an asset deal for tax purposes (the "TRA Payments").

The rights of each party under the TRA other than the Company are assignable, subject to certain restrictions.

2 unchanged sentences

The total TRA liability includes $ 25.4 million that relates to payments that originated with the Business Combination and the acquisition of Kennedy and $ 14.4 million that relates to equity transactions that occurred during the 4th quarter 2020 and 3rd quarter 2021.

The Company recorded a valuation allowance on its DTA, including the tax basis that originated with the 4th quarter 2020 and 3rd quarter 2021 equity transactions as they are not more likely than not to be realized based on the positive and negative evidence that the Company considered.

The Company recorded a partial valuation allowance on its DTA, that fully covers the tax basis that originated with the 4th quarter 2020 and 3rd quarter 2021 equity transactions as they are not more likely than not to be realized based on the positive and negative evidence that the Company considered.

The Company has not recorded the $ 14.4 million of TRA liability that relates to the 4th quarter 2020 and 3rd quarter 2021 equity transactions as the liability is not probable under ASC 450 since the related DTA is not more likely than not to be realized as evidenced by the valuation allowance.

1 unchanged sentence

If that were to occur, it would result in the need to record $ 14.4 million of additional TRA liability for 4th quarter 2020 and 3rd quarter 2021 equity transactions, which would result in a non-cash charge to pretax results.

As described in Note 1.

" Operations and Summary of Significant Accounting Policies", we adopted new lease accounting guidance effective January 4, 2021.

We determine if a contractual arrangement is a lease at inception.

3 unchanged sentences

We separate lease components from vehicles leases and do not separate non-lease components from our building leases for the purposes of measuring our lease liabilities and assets.

Our leases consist of operating leases and finance leases which are presented within current accrued expenses and other, non-current accrued expenses and other, current portion of other notes payable, and non-current portion of other notes payable on our consolidated balance sheets.

Our leases consist of operating leases which are presented within current accrued expenses and other , non-current accrued expenses and other , and finance leases are presented within current portion of other notes payable , and non-current portion of other notes payable on our consolidated balance sheets.

Leases with an initial term of 12 months or lease are not recorded on the balance sheet.

1 unchanged sentence

As many of our leases do not provide an implicit rate, we use our incremental borrowing rate based on information available at the commencement date in determining the present value of lease payments.

We recognize operating lease expense on a straight-line basis over the term of the lease within operating expenses.

Expense associated with our finance leases consists of two components, including interest on our outstanding finance lease obligations and amortization of the related right-of-use assets.

We recognize operating lease expenses on a straight-line basis over the term of the lease within operating expenses.

Expenses associated with our finance leases consists of two components, including interest on our outstanding finance lease obligations and amortization of the related right-of-use assets.

The interest component is recorded in interest expense and depreciation of the finance lease asset is recognized over a straight-line basis over the term of the lease within cost of goods sold, selling expenses, and administrative expenses on the consolidated statements of operations and comprehensive income (loss).

1 unchanged sentence

Some of our leases include optional renewal periods or termination provisions which we assess at inception to determine the term of the lease, subject to reassessment in certain circumstances.

The following table presents lease expense we have recorded on our consolidated statements of operations for the year ended January 2, 2022:

The following table presents lease expense we have recorded on our consolidated statements of operations for the years ended January 1, 2023 and January 2, 2022:

(in thousands)

Year Ended January 2, 2022

Fiscal Year Ended January 1, 2023 Fiscal Year Ended January 2, 2022

Finance lease expense:

4 unchanged sentences

Total lease expense $ 19,582 $ 11,925

(1) Included variable and short-term lease expense of $ 2.1 million and $ 3.4 million, respectively, for the year ended January 2, 2022.

(1) Included variable and short-term lease expense of $ 3.2 million and $ 3.8 million, respectively, for the year ended January 1, 2023, and $ 2.1 million and $ 3.4 million, respectively, for the year ended January 2, 2022.

Finance leases, net, are included in Property, Plant and Equipment as follows:

20 unchanged sentences

(1) Excludes lease undiscounted obligations for buildings which the Company has entered into but which have not commenced as of January 1, 2023, totaling $ 1.0 million.

The following table summarizes supplemental balance sheet information related to leases as of January 2, 2022:

(in thousands, except lease term and discount rate) Operating Leases Finance Leases

The following table summarizes supplemental balance sheet information related to leases as of January 1, 2023 and January 2, 2022:

As of January 1, 2023 As of January 2, 2022

(in thousands, except lease term and discount rate) Operating Leases Finance Leases Operating Leases Finance Leases

ROU asset, non-current (1)

7 unchanged sentences

The following table presents other information related to leases for the year ended January 1, 2023 (in thousands):

Year Ended January 2, 2022

Fiscal Year Ended January 1, 2023

Cash paid for amounts included in the measurement of lease liabilities:

3 unchanged sentences

Leased assets obtained in exchange for new lease liabilities $ 31,337

Prior to the Business Combination, CCH issued 15,833,332 warrants that were initially sold by CCH in its initial public offering of securities (the “Public Warrants”), including 1,166,666 warrants issued pursuant to those certain Forward Purchase Agreements entered into by CCH with the Sponsor and each of the independent directors of CCH (the “Forward Purchase Agreements”) that were issued at the Closing of the Business Combination as part of the Forward Purchase Agreement discussed below (the “Forward Purchase Warrants”), and 7,200,000 warrants initially sold to the Sponsor simultaneously with the closing of its initial public offering (the “Private Placement Warrants,” collectively, with the Public Warrants and Forward Purchase Warrants, the “Warrants”).

Prior to the Business Combination, CCH issued 15,833,332 warrants that were initially sold by CCH in its initial public offering of securities (the "Public Warrants”), including 1,166,666 warrants issued pursuant to those certain Forward Purchase Agreements entered into by CCH, the Sponsor, and each of the independent directors of CCH (the "Forward Purchase Agreements”) that were issued at the closing of the Business Combination as part of the Forward Purchase Agreement discussed below (the "Forward Purchase Warrants”), and 7,200,000 warrants initially sold to the Sponsor simultaneously with the closing of its initial public offering (the "Private Placement Warrants,” collectively, with the Public Warrants and Forward Purchase Warrants, the "Warrants”).

As a result of the Business Combination, the Company assumed the CCH warrants and such warrants are now exercisable for shares of UBI Class A Common Stock instead of Class A ordinary shares of CCH.

2 unchanged sentences

As of January 1, 2023, there were 7,200,000 Private Placement Warrants outstanding and all Public Warrants and Forward Purchase Warrants have been exercised (except for the Public Warrants that were redeemed by the Company on January 14, 2021).

As of January 3, 2021, there were 4,575,645 Public Warrants, 432,000 Forward Purchase Warrants, and 7,200,000 Private Placement Warrants outstanding.

Prior to January 3, 2021, 10,825,664 Public Warrants and Forward Purchase Warrants were exercised.

As of January 2, 2022, there were 7,200,000 Private Placement Warrants outstanding and all Public Warrants and Forward Purchase Warrants have been exercised (except for the Public Warrants that were redeemed by the Company on January 14, 2021).

The Private Placement Warrants and the shares of Class A Common Stock issuable upon the exercise of the Private Placement Warrants were not transferable, assignable or salable until after the completion of the Business Combination, subject to certain limited exceptions.

1 unchanged sentence

If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

We account for the Warrants as derivative liabilities in accordance with ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity (“ASC 815-40”), due to certain settlement provisions in the corresponding warrant agreement that do not meet the criteria to be classified in stockholders’ equity.

The Warrants are accounted for as derivative liabilities in accordance with ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity ("ASC 815-40”), due to certain settlement provisions in the corresponding warrant agreement that do not meet the criteria to be classified in stockholders’ equity.

Pursuant to ASC 815-40, the Warrants are now classified as a liability at fair value on the Company’s Consolidated Balance Sheet, and the change in the fair value of such liability in each period is recognized as a non-cash gain or loss in the Company’s Consolidated Statements of Operations and Comprehensive Income (loss).

The Warrants are deemed equity instruments for income tax purposes, and accordingly, there is no tax accounting relating to changes in the fair value of the Warrants recognized.

The remeasurement of the warrant liability resulted in a gain (loss) of $ 36.7 million for the year ended January 2, 2022 and $( 91.9 ) million for the Successor period from August 29, 2020 to January 3, 2021.

The remeasurement of the warrant liability resulted in a gain (loss) of $ 0.7 million for the year ended January 1, 2023 and $ 36.7 million for the year ended January 2, 2022, and $( 91.9 ) million for the Successor period from August 29, 2020 to January 3, 2021.

Such gain (loss) is not attributable to the noncontrolling interest.

The Predecessor did not have warrants and as such no remeasurement of warrant liability is recorded for the predecessor period from June 29, 2020 to August 28, 2020 and the year ended December 29, 2019.

The Predecessor did not have warrants and as such no remeasurement of warrant liability is recorded for the predecessor period from December 30, 2019 to August 28, 2020.

SIGNIFICANT CUSTOMERS

2 unchanged sentences

Successor Predecessor

Customer Year Ended January 2, 2022 From

Customer Year Ended January 1, 2023 Year Ended January 2, 2022 From

August 29, 2020

1 unchanged sentence

December 30, 2019

August 28, 2020 Year Ended December 29, 2019

August 28, 2020

Customer A 12 % 15 % 11 % 12 %

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Accounts receivable concentrations:

Successor Predecessor

Customer As of

January 1, 2023 As of

January 3, 2021 As of December 29, 2019

January 2, 2022 As of

January 3, 2021

Customer A 11 % 10 % 11 %

5 unchanged sentences

The novel coronavirus, or COVID-19, outbreak began impacting consumption, distribution and production of our products in March 2020.

We have taken necessary preventive actions and implemented additional measures to protect our employees that work on site.

We continue to experience higher demand for our products compared to historical volumes, and we are servicing that demand by increasing production and distribution activities.

We have taken necessary preventive actions and implemented additional measures to protect our associates that work on site.

Generally, producers of food products, including salty snacks, have been deemed “essential industries” by federal, state, and local governments and are exempt from certain COVID-19-related restrictions on business operations.

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The Company is authorized to issue 1,000,000,000 shares of Class A Common Stock, par value $ 0.0001 per share, of which 80,882,334 and 77,644,645 shares of UBI were issued and outstanding on January 1, 2023 and January 2, 2022, respectively.

Upon the Closing of the Business Combination, all shares of CCH Class A ordinary shares, including 3,500,000 Forward Purchase Class A Ordinary Shares of CCH that were issued at the Closing of the Business Combination as part of the Forward Purchase Agreement discussed below, and Class B ordinary shares, less shareholder redemptions, were converted on a one -for-one basis into shares of Class A Common Stock, including 2,000,000 shares of Class B Common Stock initially issued to the Sponsor, which immediately vested upon the Closing of the Business Combination and converted into shares of Class A Common Stock of the Company.

Upon the closing of the Business Combination, all shares of CCH Class A ordinary shares, including 3,500,000 Forward Purchase Class A Ordinary Shares of CCH that were issued at the closing of the Business Combination as part of the Forward Purchase Agreements discussed above and below, and Class B ordinary shares, less shareholder redemptions, were converted on a one -for-one basis into shares of Class A Common Stock, including 2,000,000 shares of Class B Common Stock initially issued to the Sponsor, which immediately vested upon the closing of the Business Combination and converted into shares of Class A Common Stock of the Company.

Class V Common Stock

3 unchanged sentences

"Acquisitions”.

As of January 2, 2022 and January 3, 2021, there were 59,349,000 and 60,349,000 , respectively, shares of Class V Common Stock outstanding.

As of both January 1, 2023 and January 2, 2022 there was 59,349,000 shares of Class V Common Stock outstanding.

On September 21, 2021, the Continuing Members exchanged 1,000,000 Common Company Units together with the surrender and cancellation of the same number of Class V Common Stock for an equal number of shares of Class A Common Stock.

1 unchanged sentence

Forward Purchases

In connection with the Closing of the Business Combination and pursuant to a Forward Purchase Agreement entered into between CCH, CCH’s Sponsor, and CCH’s independent directors, CCH consummated the sale and issuance of 3,500,000 shares issued pursuant to the Forward Purchase Agreements and Forward Purchase Warrants to acquire up to 1,166,666 Class A ordinary shares of CCH at $ 11.50 per share, for aggregate proceeds of $ 35,000,000 that were used to fund the Business Combination.

In connection with the closing of the Business Combination and pursuant to the Forward Purchase Agreements entered into between CCH, the Sponsor, and CCH’s independent directors, CCH consummated the sale and issuance of 3,500,000 shares issued pursuant to the Forward Purchase Agreements and Forward Purchase Warrants to acquire up to 1,166,666 Class A ordinary shares of CCH at $ 11.50 per share, for aggregate proceeds of $ 35,000,000 that were used to fund the Business Combination.

EARNINGS PER SHARE

8 unchanged sentences

Therefore, EPS information is omitted for the Predecessor periods.

The following table reconciles the numerators and denominators used in the computations of both basic and diluted earnings per share:

(in thousands, except share data) Year Ended January 2, 2022

The following tables reconcile the numerators and denominators used in the computations of both basic and diluted earnings per share:

(in thousands, except share data) For the Fiscal Year ended January 1, 2023 From August 29, 2020 through January 3, 2021

Basic and diluted earnings per share:

Net loss attributable to controlling interest $ ( 392 ) $ ( 99,930 )

Weighted average Class A Common Stock shares, basic and diluted 80,093,094 61,085,943

Basic and diluted earnings per share $ 0.00 $ ( 1.64 )

Anti-dilutive securities excluded from diluted earnings per share calculation:

Warrants 1,888,256 8,095,866

2020 LTIP RSUs — 1,151,262

Other RSUs 83,261 26,923

PSUs 62,408 140,076

Stock options — 34,680

Total 2,033,925 9,448,807

Class V Common Stock not subject to earnings per share calculation 59,349,000 60,349,000

Net loss attributable to noncontrolling interest $ 13,649 $ 7,971

The diluted earnings per share computation excludes the effect of certain RSUs and Options granted to Directors and Management which convert into, or are exercisable for, shares of Class A Common Stock upon vesting as their inclusion would have been anti-dilutive.

(in thousands, except share data) For the Fiscal Year Ended January 2, 2022

Basic earnings per share:

Net income attributable to controlling interest $ 20,555

Dividends and income related to participating stock-based compensation awards ( 386 )

Net income attributable to common stockholders $ 20,169

Weighted average Class A Common Stock shares, basic 76,677,981

1 unchanged sentence

Diluted earnings per share:

Net income attributable to common stockholders $ 20,555

Dividends and income related to participating stock-based compensation awards ( 386 )

Net income attributable to common stockholders $ 20,169

Net income attributable to controlling interest $ 20,555

Weighted average Class A Common Stock shares, basic 76,677,981

5 unchanged sentences

Diluted earnings per share $ 0.25

Class V Common Stock not subject to earnings per share calculation 60,063,286

Net loss attributable to noncontrolling interest $ ( 12,557 )

(in thousands, except share data) From August 29, 2020 through January 3, 2021

Basic and diluted earnings per share:

Net loss attributable to controlling interest $ ( 99,930 )

Dividends related to participating share-based compensation awards ( 110 )

Net loss attributable to common stockholders $ ( 100,040 )

Weighted average Class A Common Stock shares, basic and diluted 61,085,943

Basic and diluted earnings per share $ ( 1.64 )

Anti-dilutive securities excluded from diluted earnings per share calculation:

Warrants 8,095,866

2020 LTIP RSUs 1,151,262

Initial grant RSUs 26,923

Stock options 34,680

Total 9,448,807

Class V Common Stock not subject to earnings per share calculation 60,349,000

Weighted average Class V Common Stock not subject to earnings per share calculation 60,063,286

Net loss attributable to noncontrolling interest $ ( 12,557 )

The diluted earnings per share computation excludes the effect of certain RSUs granted to Directors and Management which convert to Class A Common Stock upon vesting 50 % at December 31, 2022 and 50 % at December 31, 2023, as their inclusion would have been anti-dilutive.

Shares of the Company’s Class V Common Stock do not participate in earnings or losses of the Company and, therefore, are not participating securities.

The PSUs, Initial Grant RSUs, and 2020 LTIP RSUs were participating securities in the Successor period because the holders of these stock-based compensation awards are entitled to participate in dividends declared on Class A Common Stock, if and when declared, on a one-to-one per-share basis.

As such, earnings per share calculations were completed under the two-class method.

At January 2, 2022 and January 3, 2021, the Continuing Members held all 59,349,000 and 60,349,000 , respectively, shares of Class V Common Stock issued and outstanding and also held an equal number of common limited liability company units of UBH, which comprise the noncontrolling interest.

The net loss attributable to the noncontrolling interest was $ 12.6 million and $ 8.0 million for the year ended January 2, 2022 and the Successor period from August 29, 2020 through January 3, 2021, respectively.

The PSUs, Initial Grant RSUs, and 2020 LTIP RSUs were not considered participating securities in the Successor period despite the holders of these stock-based compensation awards being entitled to participate in dividends declared on Class A Common Stock, if and when declared, on a one -to-one per-share basis, because the dividends are only payable upon full vesting of the awards, and as such, the dividend is forfeitable.

At both January 1, 2023 and January 2, 2022, the Continuing Members held all 59,349,000 shares of Class V Common Stock issued and outstanding and also held an equal number of common limited liability company units of UBH, which comprise the noncontrolling interest.

The net loss attributable to the noncontrolling interest was $ 13.6 million for the year ended January 1, 2023, and $ 12.6 million and $ 8.0 million for the year ended January 2, 2022 and the Successor period from August 29, 2020 through January 3, 2021, respectively.

SUBSEQUENT EVENTS

On January 24, 2022, the Company announced that its subsidiaries have entered into a definitive agreement to acquire the assets of two existing third party direct store delivery distributors, Clem Snacks, Inc., a subsidiary of Clem Companies, and J&D Snacks, Inc., which together operate more than 125 DSD routes in the New York City, Long Island, Bronx and surrounding areas of New York.

The Company closed on these transaction on February 7, 2022 and the acquisitions were funded with cash on hand as well as a draw on the ABL facility.

The Company performed a review of events subsequent to the balance sheet date through the date the financial statements were issued and determined that there were no such events requiring recognition or disclosure in the financial statements.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data