What changed in this filing

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Item 1A. Risk Factors

2024-02-29 compared with 2023-03-02 · 43 added, 35 removed, 608 unchanged (11% of the section changed)

8 unchanged sentences

Our gross profit margins may be impacted by a variety of factors, including but not limited to variations in raw materials pricing, retail customer ordering patterns, requirements and mix, sales velocities and required promotional support.

Our gross profit as a percentage of net sales fluctuate as a result of competition and other factors, including product pricing, the availability and cost of commodities, raw materials pricing (including ingredients and packaging), labor costs, COVID-19 and other global health impacts, and energy costs.

Our gross profit as a percentage of net sales fluctuate as a result of competition and other factors, including product pricing, the availability and cost of commodities, raw materials pricing (including ingredients and packaging), labor costs and other global health impacts, and energy costs.

Further, our gross profit margin may be impacted by shifts in the overall mix of products having a higher or lower profit margin.

7 unchanged sentences

However, these consumers are under no obligation to continue to repeatedly purchase our products and could stop or materially reduce purchasing our products at any time.

These consumers could cease purchasing our products for any number of reasons, some of which are beyond our control, including changing consumer trends, negative publicity regarding our brand, real or perceived quality or health issues with our products, a change in consumers’ perception of BFY brands or other specialty brands, or the availability of premium-branded or lower-priced alternative snack products, or for no reason at all.

These consumers could cease purchasing our products for any number of reasons, some of which are beyond our control, including changing consumer trends, increasing household debt, negative publicity regarding our brand, real or perceived quality or health issues with our products, a change in consumers’ perception of BFY brands or other specialty brands, or the availability of premium-branded or lower-priced alternative snack products, or for no reason at all.

Loss of consumers’ loyalty to our brands and the resulting decreased sales to consumers could have an adverse effect on our business and operating results.

26 unchanged sentences

Reductions in overall sales and promotion incentives could impact our net sales and affect our results of operations in any particular fiscal quarter.

Our reputation or brand image might be impacted as a result of issues or concerns relating to the quality and safety of our products, ingredients or packaging, and other environmental, social or governance matters, which in turn could negatively impact our operating results.

In order to sell our branded products, we need to maintain a good reputation with our stakeholders, including our customers, consumers, IOs, third-party distributors, suppliers, vendors, associates and equityholders, among others.

Issues related to the quality and safety of our products, ingredients or packaging could jeopardize our image and reputation.

Our reputation or brand image might be impacted as a result of issues or concerns relating to the quality and safety of our products, ingredients or packaging, processing techniques, and other environmental, social or governance matters, which in turn could negatively impact our operating results.

Issues related to the quality and safety of our products, ingredients packaging or processing techniques could jeopardize our image and reputation.

Negative publicity related to these types of concerns, or related to product contamination or product tampering, whether valid or not and which may not be in our control, could decrease demand for our products or cause production and delivery disruptions.

5 unchanged sentences

We may also be liable if the consumption of any of our products cause sickness or injury to consumers.

A widespread product recall could result in significant losses due to the costs of a recall, the destruction of product inventory, losses due to the frustration of our contracts with third parties, and lost sales due to the unavailability of product for a period of time.

A widespread product recall could result in significant expenses due to the costs of a recall, the destruction of product inventory, losses due to the frustration of our contracts with third parties, and lost sales due to the unavailability of product for a period of time.

We could also suffer losses from a significant adverse product liability judgment.

63 unchanged sentences

Our DSD network system and regional third-party distributor network relies on a significant number of independent operators and third-party distributors, and such reliance could affect our ability to effectively and profitably distribute and market products, maintain existing markets and expand business into other geographic markets.

Our DSD network and regional third-party distributor network rely on approximately 2,000 IOs and third-party distributors covering approximately 623 DSD-style routes, in addition to our 140 RSPs, as of the end of our 2022 fiscal year for the distribution and sale of our branded products and some private label products.

At the end of fiscal year 2023, our DSD network and regional third-party distributor network relied on approximately 2,200 IOs and third-party distributors covering approximately 600 DSD-style routes, in addition to our RSPs for the distribution and sale of our branded products and some private label products.

In order to purchase from us an exclusive right to deliver our products to retail customers in a specific territory, IOs and third-party distributors must make a commitment of capital or obtain financing to purchase such rights and other equipment to conduct their business.

48 unchanged sentences

Many aspects of our business have been, and may continue to be, directly affected by volatile commodity costs and other market inflationary pressures.

Our input costs increased significantly in fiscal year 2021 and fiscal year 2022, and we expect input cost inflation to continue in fiscal year 2023.

Our input costs increased significantly in fiscal years 2021 and 2022 but have since stabilized in fiscal year 2023.

Commodities and ingredients are subject to price volatility which can be caused by commodity market fluctuations, crop yields, seasonal cycles, weather conditions, temperature extremes and natural disasters (including due to the effects of climate change), pest and disease problems, changes in currency exchange rates, imbalances between supply and demand, and government programs and policies among other factors.

32 unchanged sentences

Many of our ingredients, raw materials and commodities are purchased in the open market.

The prices we pay for such items are subject to fluctuation, and we manage this risk through the use of fixed-price contracts and purchase orders (including buying forward at contracted prices for delivery of such supply within a period of up to a year), pricing agreements and derivative instruments, including options and futures.

The prices we pay for such items are subject to fluctuation, and we manage this risk through the use of fixed-price contracts and purchase orders, pricing agreements and derivative instruments, including options and futures.

If commodity price changes result in unexpected or significant increases in raw materials and energy costs, we may be unwilling or unable to increase our product prices or unable to effectively hedge against commodity price increases to offset these increased costs without suffering reduced volume, revenue, margins and operating results.

18 unchanged sentences

• A shift in consumer preference toward private label products and changes in consumer behavior to retail outlets that do not sell any, or a significant portion, of our products, such as hard discounters.

See “― Our performance may be impacted by general economic conditions or an economic downturn .”

See “― Disruptions in the worldwide economy may materially and adversely affect our business, financial condition and results of operations."

• Rapid growth in sales through e-commerce websites, mobile commerce applications and subscription services, which is a channel through which we may not be able to effectively compete.

7 unchanged sentences

If in the event of such a disruption our contingency plans are partially, or entirely, ineffective our operations and results of operations could be materially and adversely harmed.

Labor costs, commodity costs and logistical costs are increasing in the current economic climate, which has adversely affected our business operations and results of operations and may continue to do so in the future.

Labor costs and logistical costs are increasing in the current economic climate, which has adversely affected our business operations and results of operations.

These rising costs, as well as any increase in commodity costs may adversely affect our business operations and results of operations in the future.

Our efforts to raise prices may not be successful at offsetting these cost increases and may have other adverse effects.

We have experienced operational challenges to our production facilities and logistics networks, shortage of labor and impacts from increases in prices of packaging materials and commodities, all of which are increasing costs company-wide.

We have experienced operational challenges to our production facilities and logistics networks, shortage of labor and impacts from increases in prices of packaging materials.

In response to these inflationary costs, we have instituted price increases for our products.

5 unchanged sentences

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

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

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

We believe that our insurance coverage is customary for businesses of our size and type.

13 unchanged sentences

Such changes may include changes in:

• Food and drug laws (including U.S.

Food and Drug Administration regulations and other applicable regulations);

• Food and drug laws (including FDA regulations and other applicable regulations);

• Laws related to product labeling, including but not limited to California’s Proposition 65;

35 unchanged sentences

Natural disasters and adverse weather conditions can lower crop yields and reduce crop size and crop quality, which in turn could reduce our supplies of ingredients or increase the prices of ingredients.

Such natural disasters and adverse weather conditions can be caused or exacerbated by climate change, and the spate of recent extreme weather events, including the current drought conditions in the Western United States, the extreme cold, snow and ice experienced in Texas in February 2021 and the heat wave in the Pacific Northwest in June 2021, presents an alarming trend.

Such natural disasters and adverse weather conditions can be caused or exacerbated by climate change.

If our supplies of ingredients are reduced, we may not be able to find enough supplemental supply sources on favorable terms, if at all, which could impact our ability to supply products to our customers and adversely affect our business, financial condition and results of operations.

4 unchanged sentences

We and our subsidiaries are party to a variety of litigation, claims, legal or regulatory proceedings, inquiries and investigations, including but not limited to matters related to our advertising, marketing or commercial practices;

product labels, the difference between the actual capacity of a container and the volume of product contained in such container (which is referred to as “slack fill”), claims and ingredients;

product labels;

the difference between the actual capacity of a container and the volume of product contained in such container (which is referred to as “slack fill”), claims and ingredients;

our intellectual property rights;

12 unchanged sentences

Potential acquisitions may also entail significant transaction costs and require a significant amount of management time, even where we are unable to consummate or decide not to pursue a particular transaction.

In addition, even when acquisitions are completed, integration of acquired entities and business lines can involve significant difficulties, such as failure to achieve financial or operating objectives with respect to an acquisition, strain on our personnel, systems and operational and managerial controls and procedures, the need to modify systems or to add management resources, difficulties in the integration and retention of customers or personnel and the integration and effective deployment of operations or technologies, amortization of acquired assets (which would reduce future reported earnings), possible adverse short-term effects on cash flows or operating results, diversion of management’s attention from the operations of our business, integrating personnel with diverse backgrounds and organizational cultures, coordinating sales and marketing functions and failure to obtain and retain key personnel of an acquired business.

strain on our personnel, systems and operational and managerial controls and procedures;

the need to modify systems or to add management resources;

difficulties in the integration and retention of customers or personnel and the integration and effective deployment of operations or technologies;

amortization of acquired assets (which would reduce future reported earnings);

possible adverse short-term effects on cash flows or operating results;

diversion of management’s attention from the operations of our business;

integrating personnel with diverse backgrounds and organizational cultures;

coordinating sales and marketing functions;

and failure to retain key personnel of an acquired business.

Failure to manage these acquisition growth risks could have an adverse effect on us.

11 unchanged sentences

We may also lose the service of key personnel and significant portions of our workforce for extended periods of time due to pandemics, epidemics or other disease outbreaks.

Our ability to be successful is also dependent upon the efforts of the board of directors of the Company Board and key personnel to oversee and operate a public company.

Our ability to be successful is also dependent upon the efforts of the Company Board and key personnel to oversee and operate a public company.

We cannot assure you that the Company Board and our key personnel will be effective or successful or remain with us.

37 unchanged sentences

In addition, consumers may choose to purchase private-label products rather than branded products because they are generally less expensive.

Shifts in consumer spending could result in increased pressure from competitors or customers that my require us to increase promotional spending or reduce the prices of some of our products, or limit our ability to increase or maintain prices, which could lower our revenue and profitability.

Shifts in consumer spending could result in increased pressure from competitors or customers that may require us to increase promotional spending or reduce the prices of some of our products, or limit our ability to increase or maintain prices, which could lower our revenue and profitability.

Distributors and retailers may become more conservative in their ordering in response to these conditions and seek to reduce their inventories.

3 unchanged sentences

Additionally, it may weaken the ability of our customers, suppliers, IOs, third- party distributors, banks, insurance companies and other business partners to perform their obligations in the normal course of business, which could expose us to losses or disrupt the supply of inputs we rely upon to conduct our business.

If one or more of our key business partners fail to perform as expected or contracted for any reason, our business could be negatively impacted.

If one or more of our key business partners fail to perform as expected or are contracted for any reason, our business could be negatively impacted.

Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products and brands.

48 unchanged sentences

Any such laws or regulations enacted in the future, or any changes in how existing laws or regulations will be enforced, administered or interpreted, may lead to an increase in compliance costs, cause us to change the way we operate or expose us to additional risk of liabilities and claims, which could have a material adverse effect on our business, results of operations and financial condition.

We are subject to increasing focus on Environmental, Social and Governance (“ESG”) issues, including those related to climate change, and any perceived failure by us to meet ESG initiatives may negatively impact our business.

We are subject to increasing focus on ESG issues, including those related to climate change, and any perceived failure by us to meet ESG initiatives may negatively impact our business.

As climate change, land use, water use, deforestation, recyclability or recoverability of packaging, plastic waste, ingredients and other ESG and sustainability concerns become more prevalent, federal, state and local governments, non-governmental organizations and our customers, consumers and investors are increasingly sensitive to these issues.

12 unchanged sentences

Changes in interest rates may adversely affect our earnings and/or cash flows.

As of January 1, 2023, we had borrowed an aggregate of $867.4 million subject to variable interest rate terms.

As of December 31, 2023, we had borrowed an aggregate of $851.5 million subject to variable interest rate terms.

In the future, we may have additional debt outstanding with exposure to interest rate risk.

As a result, we may be adversely impacted by rising interest rates.

Also, at January 1, 2023, we held derivative instruments whose market values are subject to changes in the Secured Overnight Financing Rate (“SOFR”) rate.

Also, at December 31, 2023, we held derivative instruments whose market values are subject to changes in the Secured Overnight Financing Rate (“SOFR”) rate.

These derivative instruments have resulted, and may continue to result, in volatility in our financial results due to interest rate fluctuations.

Financial Conduct Authority, which regulates LIBOR, discontinued certain tenors of LIBOR in 2021 and intends to phase out the remaining tenors of LIBOR by June 30, 2023.

Financial Conduct Authority, which regulates the London Inter-Bank Offered Rate ("LIBOR"), discontinued certain tenors of LIBOR in 2021 and intend to phased out the remaining tenors of LIBOR in 2023.

The transition from LIBOR to other benchmarks has been the subject of private sector and governmental activity.

6 unchanged sentences

Increases in income tax rates or other changes in income tax laws in the United States or any particular jurisdiction in which we operate can reduce our after-tax income from such jurisdiction and adversely affect our business, financial condition or results of operations.

An increase in tax rates would also cause a corresponding increase in the Company’s Tax Receivable Agreement (“TRA ” ) liability as the Company is obligated to share 85% of the cash tax savings that are attributable to its increased tax basis in the UBH partnership assets per the Business Combination, future exchanges of UBH units for UBI stock by the Continuing Members, and annual TRA Payments, as well as the tax basis step-up that occurred in connection with the acquisition of Kennedy Endeavors, LLC (“Kennedy”), the DSD snacks business of Conagra Brands, Inc.

An increase in tax rates would also cause a corresponding increase in the Company’s TRA liability as the Company is obligated to share 85% of the cash tax savings that are attributable to its increased tax basis in the UBH partnership assets per the Business Combination, future exchanges of UBH units for shares of the Company's stock by the Continuing Members, and annual TRA Payments, as well as the tax basis step-up that occurred in connection with the acquisition of Kennedy Endeavors, LLC (“Kennedy”), the DSD snacks business of Conagra Brands, Inc.

(the “Kennedy Acquisition”).

10 unchanged sentences

Resales of shares of our Class A Common Stock could cause the market price of our Class A Common Stock to drop significantly, even if our business is doing well.

We had 80,882,334 shares of Class A Common Stock outstanding as of January 1, 2023, many of which may be freely resold by the holder of such shares or which have been registered by us for resale on a registration statement.

We had 81,187,977 shares of Class A Common Stock outstanding as of December 31, 2023, many of which may be freely resold by the holder of such shares or which have been registered by us for resale on a registration statement.

We have also registered up to 9,500,000 shares of Class A Common Stock that we may issue under the Utz Brands, Inc.

8 unchanged sentences

You may be unable to sell your Class A Common Stock unless a market is sustained.

Furthermore, our Private Placement Warrants, when exercised, will increase the number of issued and outstanding shares and may reduce the market price of our Class A Common Stock.

Furthermore, the exercise of up to 7,200,000 warrants that were initially issued to Collier Creek partners LLC, the sponsor of CCH (the “Sponsor”) simultaneously with the closing of its initially public offering (the “Private Placement Warrants”), will increase the number of issued and outstanding shares and may reduce the market price of our Class A Common Stock.

We are a holding company and our only material asset is our interest in UBH, and we are accordingly dependent upon distributions made by our subsidiaries to pay taxes, make payments under the TRA and pay dividends.

27 unchanged sentences

Pursuant to the TRA, we are required to pay to Continuing Members and/or the exchanging holders of Common Company Units, as applicable, 85% of the tax savings that we realized as a result of increases in tax basis in UBH’s assets as a result of the sale of Common Company Units for the cash consideration in the Business Combination, the purchase and redemption of the common units and preferred units in the Continuing Members and the future exchange of the Common Company Units for shares of Class A Common Stock (or cash) pursuant to the Third Amended and Restated Limited Liability Company Agreement and certain other tax attributes of UBH and tax benefits related to entering into the TRA, including tax benefits attributable to payments under the TRA, and those payments may be substantial.

At the closing of the Business Combination, the Continuing Members sold Common Company Units for the cash consideration in the Business Combination and may in the future exchange their Common Company Units, together with the surrender and cancellation of an equal number of shares of Class V Common Stock, for shares of our Class A Common Stock (or cash) pursuant to the Third Amended and Restated Limited Liability Company Agreement, subject to certain conditions and transfer restrictions as set forth therein and in the Investor Rights Agreement dated August 28, 2020 (the “Investor Rights Agreement”), entered into between the Company, the Continuing Members, Collier Creek partners LLC, the sponsor of CCH (the “Sponsor”), the Founder Holders, Collier Creek's independent directors (together with the Sponsor and the Founder Holders, the “Sponsor Parties ” ) and the representative of the Sponsor (the “Sponsor Representative ” ) in connection with the Closing of the Business Combination.

At the closing of the Business Combination, the Continuing Members sold Common Company Units for the cash consideration in the Business Combination and may in the future exchange their Common Company Units, together with the surrender and cancellation of an equal number of shares of Class V Common Stock, for shares of our Class A Common Stock (or cash) pursuant to the Third Amended and Restated Limited Liability Company Agreement, subject to certain conditions and transfer restrictions as set forth therein and in the Investor Rights Agreement dated August 28, 2020 (the “Investor Rights Agreement”), entered into between the Company, the Sponsor, the Founder Holders, Collier Creek's independent directors (together with the Sponsor and the Founder Holders, the “Sponsor Parties ” ) and the representative of the Sponsor (the “Sponsor Representative ” ) in connection with the Closing of the Business Combination.

In addition, we purchased common units and preferred units in the Continuing Members from third-party members, and the Continuing Members redeemed such units from us.

1 unchanged sentence

These increases in tax basis may increase (for income tax purposes) depreciation and amortization deductions and therefore reduce the amount of income or franchise tax that we would otherwise be required to pay in the future had such sales and exchanges never occurred.

In connection with the Business Combination, we entered into the TRA, which generally provides for the payment by it of 85% of certain tax benefits, if any, that we realize (or in certain cases is deemed to realize) as a result of these increases in tax basis and certain other tax attributes of UBH and tax benefits related to entering into the TRA, including tax benefits attributable to payments under the TRA.

In connection with the Business Combination, we entered into the TRA, which generally provides for the payment of 85% of certain tax benefits, if any, that we realize (or in certain cases is deemed to realize) as a result of these increases in tax basis and certain other tax attributes of UBH and tax benefits related to entering into the TRA, including tax benefits attributable to payments under the TRA.

These payments are our obligations and not of UBH.

65 unchanged sentences

This choice-of-forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, stockholders, agents or other associates, which may discourage such lawsuits.

Alternatively, if a court were to find this provision of the Certificate of Incorporation inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of our management and board of directors.

Certain of our significant stockholders and Utz Brands Holdings members whose interests may differ from those of our other stockholders will have the ability to significantly influence our business and management.

Pursuant to the Investor Rights Agreement that we entered into with the Sponsor (as amended, the “Investor Rights Agreement”), certain founder members of the Sponsor and their family members (the “Founder Holders”), the Sponsor Representative, the Continuing Members and the independent directors of CCH at the closing of the Business Combination in connection with the Business Combination, we agreed to nominate five designees by each of the Sponsor and the Continuing Members, respectively, to serve on the Company Board for so long as each of them and their respective affiliates and specified family members beneficially own certain specified percentages of certain economic interests in us and UBH held as of the closing of the Business Combination, without duplication.

Further, under the Investor Rights Agreement, since the Board increased the number of directors above ten, so long as the Founders Holders or Continuing Members own at least 75% of the economic interest in us that were held by such party immediately following the Business Combination (a “Qualified Party”), at least one representative of such Qualified Party serving on the Company Board must approve each action of the Company Board.

Further, under the Investor Rights Agreement, since the Company Board increased the number of directors above ten, so long as the Founders Holders or Continuing Members own at least 75% of the economic interest in us that were held by such party immediately following the Business Combination (a “Qualified Party”), at least one representative of such Qualified Party serving on the Company Board must approve each action of the Company Board.

Accordingly, the Continuing Members and the successors to the Sponsor will be able to significantly influence the approval of actions requiring Company Board approval through their voting power.

12 unchanged sentences

Volatility in the stock price of our Class A Common Stock or other reasons may in the future cause it to become the target of securities litigation or shareholder activism.

Securities litigation and shareholder activism, including potential proxy contests, could result in substantial costs and divert management’s and board of directors’ attention and resources from our business.

Securities litigation and shareholder activism, including potential proxy contests, could result in substantial costs and divert management’s and the Company Board's attention and resources from our business.

Additionally, such securities litigation and shareholder activism could give rise to perceived uncertainties as to our future, adversely affect our relationships with service providers and make it more difficult to attract and retain qualified personnel.

26 unchanged sentences

The impact of changes in fair value on earnings may have an adverse effect on the market price of our Class A Common Stock.

Unresolved Staff Comments

We have received no written comments regarding our periodic or current reports from the staff of the SEC that were issued 180 days or more preceding the end of our 2022 fiscal year and that remain unresolved.

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 1A. Risk Factors