What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-29 compared with 2023-03-02 · 345 added, 610 removed, 809 unchanged (54% of the section changed)

3 unchanged sentences

Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting (Grant Thornton LLP, Philadelphia, PA, PCAOB ID Number 248)

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 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

Consolidated Balance Sheets as of December 31, 2023 and January 1, 2023

Consolidated Statements of Operations And Comprehensive Income (Loss) for the fiscal years ended December 31, 2023, January 1, 2023, and January 2, 2022

Consolidated Statements of Equity for the fiscal years ended December 31, 2023, January 1, 2023, and January 2, 2022

Consolidated Statements of Cash Flows for the fiscal years ended December 31, 2023, January 1, 2023, and January 2, 2022

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

Board of Directors and Stockholders

Utz Brands, Inc.

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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 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.

(a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2023 and January 1, 2023, the related consolidated statements of operations and comprehensive income (loss), equity (deficit), and cash flows for each of the three years in the period ended December 31, 2023 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 December 31, 2023 and January 1, 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, 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 December 31, 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 February 29, 2024 expressed an unqualified opinion.

Basis for opinion

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Critical audit matter

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.

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

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

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Customer trade promotions

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.

As described further in Note 1 (Revenue Recognition) to the 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.

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

• We re-performed management’s process for calculating the reserves and assessed the Company’s historical ability to accurately estimate its customer trade allowances by comparing historical estimates to final settlements.

• We compared a selection of settlements subsequent to period end, which involved inspecting relevant source documents submitted by customers.

/s/ GRANT THORNTON LLP

1 unchanged sentence

Philadelphia, Pennsylvania

March 2, 2023

February 29, 2024

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

Board of Directors and Stockholders

Utz Brands, Inc.

1 unchanged sentence

We have audited the internal control over financial reporting of Utz Brands, Inc.

(a Delaware corporation) and subsidiaries (the “Company”) 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”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 1, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended January 1, 2023, and our report dated March 2, 2023 expressed an unqualified opinion on those financial statements.

(a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the period ended December 31, 2023, and our report dated February 29, 2024 expressed an unqualified opinion on those financial statements.

Basis for opinion

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Philadelphia, Pennsylvania

March 2, 2023

February 29, 2024

Utz Brands, Inc.

CONSOLIDATED BALANCE SHEETS

January 1, 2023 and January 2, 2022

December 31, 2023 and January 1, 2023

(In thousands, except share information)

January 1, 2023 As of

December 31, 2023 As of

January 1, 2023

8 unchanged sentences

Non-current Assets

Assets held for sale 7,559 —

Property, plant and equipment, net 318,881 345,198

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1,000,000,000 shares authorized;

80,882,334 and 77,644,645 shares issued and outstanding as of January 1, 2023 and January 2, 2022, respectively.

81,187,977 and 80,882,334 shares issued and outstanding as of December 31, 2023 and January 1, 2023, respectively.

Shares of Class V Common Stock, $ 0.0001 par value;

61,249,000 shares authorized;

59,349,000 and 59,349,000 shares issued and outstanding as of January 1, 2023 and January 2, 2022, respectively.

59,349,000 and 59,349,000 shares issued and outstanding as of December 31, 2023 and January 1, 2023, respectively.

Additional paid-in capital 944,573 926,919

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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

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

For the fiscal years ended December 31, 2023, January 1, 2023, and January 2, 2022

(In thousands, except share information)

Successor Predecessor

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

August 29, 2020

January 3, 2021 From

December 30, 2019

August 28, 2020

For the Fiscal Year Ended December 31, 2023 For the Fiscal Year Ended January 1, 2023 For the Fiscal Year Ended January 2, 2022

Net sales $ 1,438,237 $ 1,408,401 $ 1,180,713

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Total selling, distribution, and administrative expenses 433,119 444,404 375,207

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

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

(Loss) gain on sale of assets, net ( 7,350 ) 691 1,864

Income from operations 16,017 5,344 10,566

Other (expense) income

Interest expense ( 60,590 ) ( 44,424 ) ( 34,708 )

Other income (expense) 400 3,551 ( 2,058 ) 1,271

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

Other income 3,066 400 3,551

Gain on remeasurement of warrant liability 2,232 720 36,675

Other (expense) income, net ( 55,292 ) ( 43,304 ) 5,518

(Loss) income before income taxes ( 39,275 ) ( 37,960 ) 16,084

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

Income tax expense (benefit) 757 ( 23,919 ) 8,086

Net (loss) income ( 40,032 ) ( 14,041 ) 7,998

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Net (loss) income $ ( 40,032 ) $ ( 14,041 ) $ 7,998

Other comprehensive gain (loss):

Other comprehensive (loss) gain:

Change in fair value of interest rate swap ( 13,543 ) 47,279 2,791

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 )

Comprehensive (loss) income ( 53,575 ) 33,238 10,789

Net comprehensive loss (income) attributable to noncontrolling interest 20,819 ( 6,568 ) 12,557

Net comprehensive (loss) income attributable to controlling interest $ ( 32,756 ) $ 26,670 $ 23,346

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

For the fiscal years ended December 31, 2023, January 1, 2023, and January 2, 2022

(In thousands, except share information)

Predecessor Members'

(Deficit) Equity Accumulated Other Comprehensive (Loss) Income Noncontrolling Interest Total (Deficit) Equity

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

Net income 3,420 — — 3,420

Other comprehensive loss — ( 7,463 ) — ( 7,463 )

Merger of noncontrolling interest ( 7,314 ) — 7,314 —

Distributions to members ( 6,415 ) — — ( 6,415 )

Balance at August 28, 2020 $ ( 37,755 ) $ ( 6,055 ) $ — $ ( 43,810 )

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

Successor Shares Amount Shares Amount

Balance at August 29, 2020 57,369,050 $ 6 57,765,978 $ 6 $ 472,329 $ ( 134,331 ) $ — $ 338,010 $ 950,768 $ 1,288,778

Conversion of Restricted Sponsor Shares 2,000,000 — — — — — — — —

Conversion of Continuing Members' Retained Restricted Units — 3,483,022 — — — — — — —

Conversion of warrants 10,825,664 1 — 299,867 — — 299,868 ( 88,255 ) 211,613

Share-based compensation — — 6,790 — — 6,790 — 6,790

Exchange 900,000 — ( 900,000 ) — 13,724 — — 13,724 ( 13,724 ) —

Tax impact arising from exchanges and conversion of warrants, net of valuation allowance of $ 45,993

— — 751 — — 751 741 1,492

Net loss — — — ( 99,930 ) — ( 99,930 ) ( 7,971 ) ( 107,901 )

Other comprehensive income — — — — 924 924 — 924

Dividends declared ($ 0.11 per share of Class A Common Stock)

— — — ( 7,229 ) — ( 7,229 ) — ( 7,229 )

Distribution to noncontrolling interest — — — — — — ( 9,565 ) ( 9,565 )

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

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

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

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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

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

Shares Amount Shares Amount

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

Payments of tax withholding requirements for employee stock awards — — ( 589 ) — — ( 589 ) — ( 589 )

Share-based compensation 305,643 — — 17,069 — — 17,069 — 17,069

Tax impact arising from capital transactions — — 1,174 — — 1,174 — 1,174

Net loss — — ( 24,937 ) — ( 24,937 ) ( 15,095 ) ( 40,032 )

Other comprehensive loss — — — — ( 7,819 ) ( 7,819 ) ( 5,724 ) ( 13,543 )

Cash dividends declared ($ 0.228 per

share of Class A Common Stock)

— — — ( 18,548 ) — ( 18,548 ) — ( 18,548 )

Distribution to noncontrolling interest — — — — — — ( 13,532 ) ( 13,532 )

Balance at December 31, 2023 81,187,977 $ 8 59,349,000 $ 6 $ 944,573 $ ( 298,049 ) $ 22,958 $ 669,496 $ 714,187 $ 1,383,683

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

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

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

For the fiscal years ended December 31, 2023, January 1, 2023, and January 2, 2022

(In thousands)

Successor Predecessor

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

August 29, 2020

January 3, 2021 From

December 30, 2019

August 28, 2020

For the Fiscal Year Ended December 31, 2023

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

Cash flows from operating activities

Net (loss) income $ ( 40,032 ) $ ( 14,041 ) $ 7,998

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

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

Impairment and other charges 12,575 4,678 —

Depreciation and amortization 79,488 86,801 80,725

Amortization of step-up of inventory — — 5,795 —

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

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

Gain on remeasurement of warrant liability ( 2,232 ) ( 720 ) ( 36,675 )

Loss (gain) on sale of assets 7,350 ( 691 ) ( 1,864 )

Stock based compensation 17,069 10,632 12,961

Loss on debt extinguishment — — 2,500 —

Deferred income taxes ( 8,938 ) ( 29,359 ) 4,828

2 unchanged sentences

Accounts receivable, net 1,855 ( 5,597 ) ( 4,528 )

Inventories, net ( 38,490 ) ( 10,595 ) 887 ( 6,883 )

Inventories 12,652 ( 38,490 ) ( 10,595 )

Prepaid expenses and other assets ( 14,433 ) ( 18,379 ) ( 2,931 )

Accounts payable and accrued expenses and other 9,730 51,426 ( 5,451 )

Net cash provided by (used in) operating activities 48,193 48,387 ( 932 ) 30,627

Net cash provided by operating activities 76,640 48,193 48,387

Cash flows from investing activities

Acquisition of Utz Brands Holdings, LLC, net of cash acquired — — ( 185,448 ) —

Acquisitions, net of cash acquired — ( 75 ) ( 117,585 )

8 unchanged sentences

Cash flows from financing activities

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

Borrowings on line of credit 71,000 79,000 121,135

Repayments on line of credit ( 70,632 ) ( 115,000 ) ( 85,135 )

Borrowings on term debt and notes payable 13,113 124,592 825,139

5 unchanged sentences

Dividends paid ( 18,548 ) ( 17,157 ) ( 11,908 )

Distributions to members — — — ( 6,415 )

Distribution to noncontrolling interest ( 13,532 ) ( 9,615 ) ( 18,987 )

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

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

Net cash (used in) provided by financing activities ( 49,055 ) 58,906 82,778

Net (decrease) increase in cash and cash equivalents ( 20,907 ) 31,032 ( 4,933 )

Cash and cash equivalents at beginning of period 72,930 41,898 46,831

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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, UQF.

UQF is consolidated with its wholly-owned subsidiaries:

UTZTRAN, LLC;

Heron Holding Corporation (“Heron”), with its wholly-owned subsidiaries Golden Flake Snack Foods, Inc.

(“Golden Flake”), Inventure Foods, Inc.

and its subsidiaries (“Inventure Foods”), and Kitchen Cooked Inc.

(“Kitchen Cooked”);

Kennedy Endeavors, LLC (“Kennedy”);

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

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

Utz Quality Foods, LLC Utz Brands, Inc.

UTZTRAN, LLC Utz Brands Holdings, LLC

Golden Flake Snack Foods, Inc.

GH Pop Holdings, LLC

Inventure Foods, Inc.

and its subsidiaries Heron Holding Corporation

Kennedy Endeavors, LLC R.W.

Garcia Holdings, LLC

Good Health Natural Products, LLC

Condor Snack Foods, LLC

Snikiddy, LLC

Kitchen Cooked, Inc.

Truco Enterprises, LLC

Garcia Co., Inc.

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.

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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.

Prior Period Revision - Statement of Cash Flows – For the fiscal year ended December 31, 2023, the Company disclosed the borrowings of lines of credit and repayments of lines of credit as separate line items within the financing activities section of the Consolidated Statement of Cash Flows.

The Company has corrected these line items for the fiscal years ended January 1, 2023 and January 2, 2022 for comparability purposes and deems the change to those periods to be immaterial.

Operations – The Company 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.

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

Accounts are written off when management determines the account is uncollectible.

Finance charges are not usually assessed on past-due accounts.

Inventories – Inventories are stated at the lower of cost (first-in, first-out) or net realizable value.

The Company's methodology to measure the provision for credit losses requires an estimation of loss rates based upon historical loss experience adjusted for factors that are relevant to determining the expected collectability of accounts receivable.

Some of these factors include current market conditions, delinquency trends, aging behavior of receivables, and customer classes or individual customers as well as expectations of future credit losses and the customers ability to pay.

The Company's estimates are reviewed and revised periodically based on the ongoing evaluation of credit quality indicators.

Historically, actual write-offs for uncollectible accounts have not significantly differed from prior estimates.

The Company's bad debt expense was $ 1.2 million and $ 0.9 million for the fiscal years ended December 31, 2023 and January 1, 2023, respectively.

Inventories – Inventories are stated at the lower of cost (based on a method that approximates first-in, first-out or weighted average) or net realizable value.

Inventory write-downs are recorded for shrinkage, damaged, stale and slow-moving items.

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

Hosting arrangements – Certain of our service contracts have been deemed to be hosting arrangements.

Certain costs incurred for the implementation of a hosting arrangement that is a service contract are capitalized and amortized on a straight–line basis over the term of the respective contract.

Amortization begins for each component of the hosting arrangement when the component becomes ready for its intended use.

Capitalized implementation costs are presented in Other assets of the Consolidated Balance Sheets.

Amortization expense of the capitalized implementation costs is presented in Administrative in the Consolidated Statements of Operations.

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.

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The benefit of tax positions taken or expected to be taken in the Company’s income tax returns is recognized in the financial statements if such positions are more likely than not of being sustained upon examination by taxing authorities.

Differences between tax positions taken or expected to be taken in a tax return and the benefit recognized and measured pursuant to the interpretation are referred to as "unrecognized benefits”.

A liability is recognized (or amount of net operating loss carryover or amount of tax refundable is reduced) for an unrecognized tax benefit because it represents an enterprise’s potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provisions of ASC 740-10.

Differences between tax positions taken or expected to be taken in a tax return and the benefit recognized and measured pursuant to the interpretation are referred to as "unrecognized benefits.” A liability is recognized (or amount of net operating loss carryover or amount of tax refundable is reduced) for an unrecognized tax benefit because it represents an enterprise’s potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provisions of ASC 740-10.

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

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

As of December 31, 2023 and January 1, 2023, 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.

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Gain/loss from the sale of a distribution route is recorded upon the completion of the sale transaction, and is calculated based on the difference between the sale price of the distribution route and the asset carrying value of the distribution route as of the date of sale.

The Company records intangible assets for distribution routes that it purchases based on the payment that the Company makes to acquire the route, and records the purchased distribution routes as indefinite-lived intangible assets under FASB ASC 350, Intangibles – Goodwill and Other.

The indefinite lived intangible assets are subject to annual impairment testing.

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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 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.

For the latest qualitative analysis performed, which took place on the first day of the fourth quarter of 2023, we had taken into consideration all the events and circumstances listed in Topic 350, in addition to other entity-specific factors that have taken place.

Our fiscal year 2023 qualitative analysis concluded that Goodwill and our intangible assets were not impaired.

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 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 Company uses various forms of long-term incentives including, but not limited to, stock options, restricted stock units ("RSUs”) and performance share units ("PSUs”).

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

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The Company accounts for forfeitures as they occur.

Fair Value of Financial Instruments – Financial instruments held by the Company include cash and cash equivalents, accounts receivable, hedging instruments, purchase commitments on commodities, accounts payable and debt.

Fair Value of Financial Instruments – Financial instruments held by the Company include cash and cash equivalents, accounts receivable, hedging instruments, warrants, purchase commitments on commodities, accounts payable and debt.

The carrying value of all cash and cash equivalents, accounts receivable and accounts payable approximate their fair value due to their short-term nature.

The carrying value of the debt is also estimated to approximate its fair value based upon current market conditions and interest rates.

The fair value of the hedging instruments are revalued at each reporting period.

The fair value of the hedging instruments is revalued at each reporting period.

The related gains and losses of the hedging instruments are reported in Prepaid expense and other assets and Accounts payable and accrued expenses and other on the Consolidated Statement of Cash Flow.

Self-Insurance – The Company is primarily self-insured, up to certain limits, for employee group health claims.

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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 $ 18.7 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.

Total health care expense under the program was $ 22.2 million for the fiscal year ended December 31, 2023, and $ 18.7 million for the fiscal year ended January 1, 2023, and $ 18.0 million for the fiscal year ended January 2, 2022 The reserve for unpaid claims, which includes an estimate of claims incurred but not reported, was $ 2.0 million and $ 1.6 million at December 31, 2023 and January 1, 2023, respectively.

The Company is primarily self-insured through large deductible insurance plans for automobile, general liability and workers’ compensation.

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

The expense associated with automobile, general liability and workers’ compensation insurance programs totaled $ 8.5 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 expense associated with automobile, general liability and workers’ compensation insurance programs totaled $ 11.1 million for the fiscal year ended December 31, 2023, $ 8.5 million for the fiscal year ended January 1, 2023, and $ 8.7 million for the fiscal year ended January 2, 2022.

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

As of January 1, 2023 and January 2, 2022, the Company had reserves totaling $ 4.6 million and $ 5.9 million, respectively, for these insurance programs.

As of December 31, 2023 and January 1, 2023, the Company had reserves totaling $ 4.1 million and $ 4.6 million, respectively, for these insurance programs.

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

Shipping and handling expenses for products shipped to customers totaled $ 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.

Shipping and handling expenses for products shipped to customers totaled $ 45.0 million for the fiscal year ended December 31, 2023, $ 59.5 million for the fiscal year ended January 1, 2023, and $ 57.0 million for the fiscal year ended January 2, 2022.

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

The Company had no significant direct response advertising.

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.

Advertising expenses totaled $ 12.3 million for the fiscal year ended December 31, 2023, $ 9.9 million for the fiscal year ended January 1, 2023, and $ 11.8 million for the fiscal year ended January 2, 2022.

Cooperative advertising, primarily consisting of in-print advertising, point-of-sale displays, and in-store demos, totaled $ 29.8 million for the fiscal year ended December 31, 2023, $ 21.6 million for the fiscal year ended January 1, 2023, and $ 17.7 million for the fiscal year ended January 2, 2022.

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.

Profit sharing contributions are made at the discretion of the Board of Directors and expenses recognized related to the profit sharing contribution was $ 5.5 million for the fiscal year ended December 31, 2023, $ 6.3 million for the fiscal year ended January 1, 2023, and $ 3.9 million for the fiscal year ended January 2, 2022.

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.

The expense related to the matching contributions was $ 1.7 million for the fiscal year ended December 31, 2023, $ 1.4 million for the fiscal year ended January 1, 2023, and $ 1.9 million for the fiscal year ended January 2, 2022.

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 revenue contracts generally have a single performance obligation.

Revenue, which includes shipping and handling charges billed to the customer, is reported net of variable consideration and consideration payable to customers, including applicable discounts, returns, allowances, trade promotion, consumer coupon redemption, unsaleable product, and other costs.

Amounts billed and due from customers are classified as accounts receivables and require payment on a short-term basis and, therefore, the Company does not have any significant financing components.

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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 $ 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.

The Company has reserves in place of $ 17.4 million as of December 31, 2023, which include adjustments taken by customers of $ 6.2 million that are awaiting final processing and reserves of $ 46.3 million as of January 1, 2023, which include adjustments taken by customers of $ 32.8 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.

Customer Concentrations – One customer provided in excess of 10% of the Company's net sales during the fiscal years ended December 31, 2023, January 1, 2023 and January 2, 2022 in the amount of 13 %, 12 % and 15 %, respectively.

In addition, one customer provided in excess of 10% of the Company's accounts receivable at January 1, 2023 and January 2, 2022 in the amount of 11 % and 10 %, respectively.

No customer provided greater than 10% of the Company's accounts receivable at December 31, 2023.

Business Combinations – The Company evaluates acquisitions of assets and other similar transactions to assess whether or not the transaction should be accounted for as a business combination or asset acquisition by first applying a screen test to determine if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets.

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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.

Distributor Buyouts - During the fiscal years ended December 31, 2023 and January 1, 2023 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, which were accounted for as contract terminations and asset purchases, resulted in expense of $ 1.5 million and $ 23.0 million for the fiscal years ended December 31, 2023 and January 1, 2023, respectively and are included within selling and distribution expenses on the Consolidated Statement of Operations and Comprehensive Income (Loss) 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 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.

2016-13, Financial Instruments-Credit Losses:

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

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

On June 5, 2020, UBH entered into a definitive Business Combination Agreement with CCH and the Continuing Members.

At the closing of the Business Combination (the "Closing") on August 28, 2020 (the "Closing Date"), the Company domesticated into a Delaware corporation and changed its name to "Utz Brands, Inc." At the Closing, the Company (i) acquired certain common and preferred interests of the Continuing Members from third party members ("UPA Seller”), and the Continuing Members then redeemed such common and preferred interests for, and the Company received, an equivalent value of common limited liability company units of UBH, (ii) contributed cash in exchange for additional common limited liability company units of UBH, and (iii) purchased additional common limited liability company units and 100 % of the managing interests of UBH from the Continuing Members.

As part of the Business Combination, the Continuing Members (a) received certain cash considerations for the common limited liability company units that they sold to the Company, (b) received such number of shares of newly issued non-economic Class V Common Stock in the Company equal to the common limited liability company units that the Continuing Members retained in UBH, and a unit of limited liability company units of UBH and a share of Class V Common Stock are exchangeable for one share of Class A Common Stock of the Company, (c) received certain restricted common limited liability company units in UBH (the "Retained Restricted Units") that would be vested under certain market conditions, which vested as of the Closing, and (d) entered into a Tax Receivable Agreement ("TRA”) that requires the Company to pay to the Continuing Members 85% of the applicable cash savings, if any, in U.S.

federal and state income tax determined based on certain attributes as defined in the TRA.

In connection with the Closing, UBH and the Company converted all of the outstanding phantom unit awards issued under the Utz Quality Foods, LLC 2018 Long-Term Incentive Plan ("2018 LTIP") into restricted stock units (“2020 LTIP RSUs”) issued by the Company under the Utz Quality Foods, LLC 2020 Long-Term Incentive Plan (the "2020 LTIP").

Further discussion of the purchase consideration of the Business Combination is disclosed later in this footnote.

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

Under the ASC 805, Business Combinations, acquisition method of accounting, purchase price allocation of assets acquired and liabilities assumed of UBH are presented based on their estimated fair values as of the Closing.

ASC 805 establishes a measurement period to provide the Company with a reasonable amount of time to obtain the information necessary to identify and measure various items in a business combination and cannot extend beyond one year from the acquisition date.

As a result of the Business Combination, the Company’s financial statement presentation distinguishes UBH as the “Predecessor” through the Closing Date.

The Company, which includes consolidation of UBH subsequent to the Business Combination, is the “Successor” for periods after the Closing Date.

As a result of the application of the acquisition method of accounting in the Successor period, the financial statements for the Successor period are presented on a full step-up basis as a result of the Business Combination, and are therefore not comparable to the financial statements of the Predecessor period that are not presented on the same full step-up basis due to the Business Combination.

The following table summarizes the total business enterprise value, comprised of the fair value of certain purchase consideration paid by the Company to the Continuing Members, the fair value of the noncontrolling interest and the fair value of certain net debt assumed by the Company at Closing:

(in thousands)

Total cash consideration $ 199,161

Tax Receivable Agreement obligations to the Continuing Members (1)

Replaced Awards (2)

Continuing Members’ Retained Restricted Units in UBH (3)

Total purchase consideration 289,705

Noncontrolling interest (4)

Net debt assumed 648,150

Total business enterprise value $ 1,834,556

(1) Under the terms of the TRA, the Company generally will be required to pay to the Continuing Members 85% of the applicable cash savings, if any, in U.S.

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

The fair value of these contingent payments at the Closing was $ 25.3 million which has been recorded as a non-current accrued expense.

Refer to Note 15.

"Income Taxes" for additional information on the TRA.

(2) Represents the fair value of the Phantom Units associated with the pre-combination requisite service period and issued under the 2018 LTIP that were converted into 2020 LTIP RSUs of the Company issued under the 2020 LTIP at the Closing.

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

Compensation expenses 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.

"Share-Based Compensation" for additional information on the 2020 LTIP RSUs.

(3) A total of 3,483,022 common limited liability company units that were initially subject to certain restrictions (the "Retained Restricted Units") in UBH were received by the Continuing Members at the Closing.

These Retained Restricted Units were vested and converted to common limited liability company units of UBH at the Closing, as the vesting conditions were all met as of the Closing.

The fair value of the Retained Restricted Units was calculated based on the stock price of the Company at the August 28, 2020 Closing, less a 5 % lack of marketability discount due to a restriction on the exchange of the Continuing Members’ common limited liability company units to Class A Common Stock of the Company for a period not to exceed 12 months from the Closing.

(4) The noncontrolling interest represents the common limited liability company units of UBH held by the Continuing Members.

The fair value of these units was determined based on the Class A Common Stock price of the Company at the August 28, 2020 Closing, less a 5 % lack of marketability discount due to a restriction on the exchange of the Continuing Members’ common limited liability company units to Class A Common Stock of the Company for a period not to exceed 12 months from the Closing.

The following table summarizes the fair values of the assets acquired and liabilities assumed of UBH at Closing:

(in thousands)

Assets acquired:

Cash and cash equivalents $ 13,713

Accounts receivable 119,339

Inventory 63,862

Prepaid expenses and other assets 6,116

Notes receivable 29,453

Property, plant and equipment 269,951

Identifiable intangible assets (1)

Other assets 7,086

Total assets acquired:

Liabilities assumed:

Accounts payable 49,531

Accrued expenses 78,223

Notes payable 34,547

Deferred tax liability 25,381

Total liabilities assumed:

Net identifiable assets acquired 1,192,988

(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:

Fair Value Useful Life

(In Thousands) (In Years)

Indefinite lived trade names $ 355,500 Indefinite

Finite lived trademarks 56,000 15

Customer relationships 443,500 25

Technology 43 5

Master distribution rights 2,221 15

Company owned routes 13,886 Indefinite

Total $ 871,150

(2) The goodwill of $ 641.6 million represents the excess of the gross consideration transferred over the fair value of the underlying net tangible and identifiable intangible assets acquired and liabilities assumed.

Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not recognized as separate identifiable intangible assets apart from goodwill.

Intangible assets not recognized apart from goodwill consist primarily of the strong market position and the assembled workforce of UBH.

A portion of the goodwill recognized is expected to be deductible for income tax purposes.

As of August 28, 2021, the purchase price allocation had been finalized.

The predecessor financial statements of UBH include $ 25.0 million of transaction costs from December 30, 2019 to August 28, 2020.

These transaction costs are recorded within administrative expenses within the consolidated statements of operations and comprehensive income.

Prior to the Closing Date, CCH incurred $ 13.4 million of transaction costs related to the Business Combination, which are not reported in the predecessor consolidated statements of operations and comprehensive income as CCH is not the predecessor.

UBH contributed revenues of $ 325.6 million and net loss of $ 13.8 million in the consolidated statement of operations for the period from the acquisition date of August 28, 2020 to January 3, 2021.

Truco Holdco Inc.

Acquisition and OTB Brand Purchase

On November 11, 2020 the Company caused its subsidiaries, UQF and Heron, to enter into a Stock Purchase Agreement among UQF, Heron, Truco and Truco Holdings LLC.

On December 14, 2020, pursuant to the Stock Purchase Agreement, the Company caused its subsidiary, Heron, to consummate the Truco Acquisition.

Upon completion of the Truco Acquisition, Truco became a wholly owned subsidiary of Heron.

At the closing of the Truco Acquisition, the Company paid the aggregate cash purchase price of approximately $ 405.1 million to Truco Holdings LLC, including payments of approximately $ 3.0 million for cash on hand at Truco at the closing of the Truco Acquisition, less estimated working capital adjustments, subject to customary post-closing adjustments.

In addition, on December 14, 2020, UQF consummated the 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.

The IP Purchase is accounted for separately from the Truco Acquisition, as Truco and the OTB IP were acquired from two different selling parties that were not under common control and are two separate transactions.

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

For the Truco Acquisition, the Company was determined to be the accounting acquirer and Truco was determined to be the accounting acquiree, in accordance with ASC 805.

In accordance with the ASC 805 acquisition method of accounting, the purchase price allocation of assets acquired and liabilities assumed of Truco are presented based on their estimated fair values as of the closing date of the acquisition.

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

(in thousands)

Purchase consideration $ 405,081

Tax consideration (1)

Total consideration 408,749

Assets acquired:

Accounts receivable 15,609

Inventory, net 2,629

Prepaid expenses and other assets 4,290

Property, plant and equipment 461

Other assets 1,219

Customer relationships (2)

Total assets acquired:

Liabilities assumed:

Accounts payable 5,702

Accrued expenses 4,492

Other liabilities 26

Deferred tax liability 50,980

Total liabilities assumed:

Net identifiable assets acquired 193,819

(1) The Stock Purchase Agreement provided that Truco Holdings LLC is entitled to receive any tax refunds received by the Company after the closing date for any pre-closing date tax period of Truco.

The Company estimated an income tax refund receivable in the amount of $ 3.7 million related to the pre-acquisition tax periods, which was reflected on the Company's consolidated balance sheet as of January 3, 2021.

The Company recorded a corresponding payable of $ 3.7 million to Truco Holdings LLC.

(2) The identifiable intangible assets represent the existing customer relationships of Truco that were valued using a discounted cash flow model using projected sales growth, attrition and a useful life of 15 years.

Truco’s customer relationship fair value is $ 225.0 million.

The Company has determined that all the acquired customer relationships will be amortized over a period of 15 years on a straight-line basis commensurate with the acquisition date expectations for the economics that are to be provided by the customer relationships.

(3) The goodwill of $ 214.9 million represents the excess of the gross consideration transferred over the fair value of the underlying net tangible and identifiable intangible assets acquired and liabilities assumed.

Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not recognized as separate identifiable intangible assets apart from goodwill.

Intangible assets not recognized apart from goodwill consist primarily of the strong market position and the assembled workforce of Truco.

As of December 14, 2021, the purchase price allocation had been finalized.

The Company incurred $ 5.6 million of transaction costs directly related to the acquisition.

These transaction costs are recorded within administrative expenses within the consolidated statements of operations and comprehensive income.

Truco contributed revenues of $ 9.7 million and net income of $ 0.8 million in the consolidated statement of operations and comprehensive income (loss) for the period from the acquisition date of December 14, 2020 to January 3, 2021.

Recently Issued Accounting Standards – In June 2016, the FASB issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments-Credit Losses:

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

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

Topic 326 was effective for the Company beginning in fiscal year 2023.

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

In December 2023, FASB issued ASU 2023-09, Income Taxes:

Improvements to Income Tax Disclosures, to amend existing income tax disclosure guidance, primarily requiring more detailed disclosures for income taxes paid and the effective tax rate reconciliation.

The ASU is effective for annual reporting periods beginning after December 15, 2024, with early adoption permitted and can be applied on either a prospective or retroactive basis.

The Company is currently evaluating the ASU to determine its impact on the Company's income tax disclosures.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting:

Improvements to Reportable Segment Disclosures, to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

Among other changes, the amendments will require disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss.

The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and should be applied on a retrospective basis.

Early adoption is permitted.

The Company is currently evaluating the ASU to determine its impact on the Company's disclosures.

On January 11, 2021, the Company announced that its subsidiary, UQF, entered into a definitive agreement with Snak-King Corp.

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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:

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

(in thousands)

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

Please see "Note 20.

Subsequent Events" for the discussion of the disposition of RW Garcia by the Company in February 2024.

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:

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(in thousands) As of

January 1, 2023

As of January 2, 2022

December 31, 2023 As of January 1, 2023

Finished goods $ 65,673 $ 67,386

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(in thousands) As of

January 1, 2023

As of January 2, 2022

December 31, 2023 As of January 1, 2023

Land $ 28,561 $ 30,582

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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.

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

During the fiscal year ended January 1, 2023, the Company received $ 3.9 million in insurance proceeds related to a partial settlement of damaged property and equipment, resulting in a gain during fiscal the year ended January 1, 2023 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.

In addition, during the fiscal year ended January 1, 2023, the Company received $ 6.0 million in proceeds related to a partial settlement of a business interruption insurance claim.

During the fiscal year ended December 31, 2023, the Company received an additional $ 1.7 million in insurance proceeds related to the settlement of damaged property and equipment and additional $ 1.3 million related to the settlement of the business interruption insurance claim.

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.

The Company intends to sell this facility and expects to dispose of the property within the next twelve months.

As a result, the Company recorded additional impairments for the fiscal year ended December 31, 2023 totaling $ 1.9 million recorded to Administrative expenses on the Consolidated Statement of Operations and has reclassified this facility on its consolidated balance sheet to Assets held for sale in the amount of $ 1.6 million.

The fair value of this facility was based upon prices of similar assets.

During the fiscal year ended December 31, 2023, the Company recorded expenses of $ 8.9 million in connection with the closure of the Company's manufacturing facility in Birmingham, Alabama, which included $ 1.3 million in severance and related costs and $ 10.6 million of asset impairments related to fixed assets.

The severance and related expenses are recorded in the cost of goods sold line on the Consolidated Statement of Operations and Comprehensive Income (Loss) for the fiscal year ended December 31, 2023.

The fixed asset impairments are recorded in the administrative expenses line on the Consolidated Statement of Operations and Comprehensive Income (Loss).

The Company has identified a potential buyer for this property and has reclassified this property to Assets held for sale on the consolidated balance sheet at December 31, 2023 in the amount of $ 6.0 million.

During the fiscal year ended December 31, 2023, the Company completed the sale of the Company's manufacturing facility in Bluffton, Indiana, which resulted in a loss on sale of the assets of $ 13.4 million.

Also, in connection with the sale the Company recorded $ 4.7 million of expense related to the termination of a contract that was settled with the sale.

Additionally, the Company entered into a supply agreement with the buyer pursuant to which the buyer is obligated to co-manufacture certain products at below market rates for up to one year .

The Company recorded a tolling asset of $ 0.6 million for the difference between the rate charged and the market rate for these services.

If the buyer defaults on its obligations to manufacture any of the committed products, a financial penalty will be assessed based on the contractual terms required in the supply agreement.

In a separate transaction, the Company completed the sale of land in Hanover, Pennsylvania to a separate third-party for a gain of $ 4.0 million.

Depreciation expense was $ 40.5 million for the fiscal year ended December 31, 2023, $ 47.8 million for the fiscal year ended January 1, 2023, and $ 43.1 million for the fiscal year ended January 2, 2022.

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

A rollforward of goodwill is as follows:

(in thousands)

Balance as of December 29, 2019 $ 202,407

Acquisition of Kitchen Cooked 4,060

Kennedy acquisition adjustment 989

Balance as of August 28, 2020 $ 207,456

A roll forward of goodwill is as follows:

(in thousands)

Balance as of August 29, 2020 $ 644,956

Acquisition of H.K.

Anderson 3,540

Acquisition of Truco 213,687

Balance as January 3, 2021 $ 862,183

Acquisition of Vitner's 17,880

Acquisition of Festida Foods 11,603

Acquisition of RW Garcia 25,917

Truco acquisition adjustment 1,243

Business Combination agreement adjustment ( 3,388 )

Balance as January 2, 2022 915,438

Balance as of January 2, 2022

RW Garcia acquisition adjustment ( 143 )

Balance as January 1, 2023 $ 915,295

Balance as of January 1, 2023

Balance as of December 31, 2023

Intangible assets, net, consisted of the following:

(in thousands) As of January 1, 2023 As of January 2, 2022

(in thousands) As of December 31, 2023 As of January 1, 2023

Subject to amortization:

Distributor/customer relationships $ 677,930 $ 677,930

Technology — 43

Trademarks 63,850 63,850

Master distribution rights — 2,221

Amortizable assets, gross 741,780 741,780

6 unchanged sentences

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.

During the fiscal year 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.

There were no other significant changes to intangible assets during the fiscal years ended December 31, 2023 and January 1, 2023, other than those which arise from the ordinary 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 fiscal year ended December 31, 2023, $ 37.7 million for the fiscal year ended January 1, 2023, and $ 37.0 million for the fiscal year ended January 2, 2022.

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

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

Estimated future amortization expense is as follows:

(in thousands) As of January 1, 2023

(in thousands) As of December 31, 2023

2024 $ 37,668

5 unchanged sentences

The notes bear interest at rates ranging from 0.00 % to 10.40 % 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.

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 notes receivable balances due from IOs at December 31, 2023 and January 1, 2023 totaled $ 17.6 million and $ 22.0 million, respectively, and are collateralized by the routes for which the loans are made.

The Company has a corresponding notes payable liability, related to the IOs notes receivables, of $ 16.5 million and $ 21.1 million at December 31, 2023 and January 1, 2023, respectively.

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

"Long-Term Debt."

Other notes receivable totaled $ 0.1 million and $ 0.2 million as of January 1, 2023 and January 2, 2022, respectively.

Other notes receivable totaled $ 0.1 million as of each of December 31, 2023 and January 1, 2023.

ACCRUED EXPENSES AND OTHER

Current accrued expenses and other consisted of the following:

(in thousands) As of January 1, 2023 As of January 2, 2022

(in thousands) As of December 31, 2023 As of January 1, 2023

Accrued compensation and benefits $ 21,466 $ 38,974

Operating ROU liability (see "Note 16.

Leases") 12,389 9,152

Operating right of use liability 14,992 12,389

Insurance liabilities 6,811 6,701

Accrued freight and manufacturing related costs 4,424 10,817

Acquisition tax consideration 1,131 5,660

Accrued dividends and distributions 7,972 7,989

Short term interest rate hedge liability — 4,548

Accrued sales tax 100 1,300

Accrued interest 13,280 1,151

2 unchanged sentences

Non-current accrued expenses and other consisted of the following:

(in thousands) As of January 1, 2023 As of January 2, 2022

TRA liability

$ 25,426 $ 24,443

Operating ROU liability (see "Note 16.

Leases") 35,331 23,226

(in thousands) As of December 31, 2023 As of January 1, 2023

Operating right of use liability $ 43,928 $ 35,331

Tax Receivable Agreement liability 24,297 25,426

Supplemental retirement and salary continuation plans 6,559 6,512

Other long term accrued expenses — 52

Long-term portion of an interest rate hedge liability 1,936 —

Total accrued expenses and other $ 76,720 $ 67,269

5 unchanged sentences

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.

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 London Inter-Bank Rate ("LIBOR") to the Secured Overnight Financing Rate ("SOFR").

As of December 31, 2023 and January 1, 2023, $ 0.4 million and $ 0.0 million , respectively, were outstanding under this facility.

Availability under the ABL facility is based on a monthly accounts receivable and inventory borrowing base certification, which is net of outstanding letters of credit and amounts borrowed.

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

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.

As of December 31, 2023 and January 1, 2023, $ 158.4 million and $ 163.0 million, respectively, was available for borrowing, net of letters of credit.

The ABL facility is also subject to unused line fees ( 0.5 % at both December 31, 2023 and January 1, 2023) and other fees and expenses.

On July 20, 2023, the ABL facility was further amended to increase the credit limit to $ 225.0 million and extend the maturity through the earlier of July 20, 2028, or 91 days prior to the maturity of the Term Loan B (as defined below).

The Company incurred fees of $ 0.7 million in connection with the amendment to the ABL facility.

Standby letters of credit in the amount of $ 12.2 million and $ 12.0 million have been issued as of December 31, 2023 and January 1, 2023, respectively.

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

Term debt and financing obligations

On November 21, 2017, the Company entered into a First Lien Term Loan Credit Agreement (the "First Lien Term Loan”) in a principal amount of $ 535.0 million and a Second Lien Term Loan Credit Agreement (the “Second Lien Term Loan”, and collectively with the First Lien Term Loan, the "Term Loans”) in a principal amount of $ 125.0 million.

The proceeds of the Term Loans were used to refinance the Company’s January 2017 credit facility and fund the acquisition of Inventure Foods and the repurchase of the predecessor membership units held by a minority investor.

The First Lien Term Loan requires quarterly principal payments of $ 1.3 million beginning March 2018, with a balloon payment due for any remaining balance on the seventh anniversary of closing, or November 21, 2024.

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

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

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

The Company incurred closing and other costs associated with the Term Loans, which were allocated to each loan on a specific identification basis based on original principal amounts.

Finance fees allocated to the First Lien Term Loan and the Second Lien Term Loan were $ 10.7 million and $ 4.1 million, respectively, which were presented net within "non-current portion of debt” on the consolidated balance sheets for the Predecessor periods.

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

Deferred fees associated with the term loans under the January 2017 credit agreement were fully expensed during 2017 and other deferred financing fees were derecognized as a result of the Business Combination as described in 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 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.

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

Separately, on October 21, 2019, the Company entered into a Senior Secured First Lien Floating Rate Note (the "Secured First Lien Note”) in a principal amount of $ 125.0 million.

Proceeds from the Secured First Lien Note were used primarily to finance the Kennedy Acquisition.

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

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

(the "Bridge Credit Agreement”).

The proceeds of the Bridge Credit Agreement were used to fund the Company’s acquisition of Truco and the IP Purchase (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 proceeds of the Bridge Credit Agreement were used to fund the Company’s acquisition of Truco Holdco Inc.

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

The Bridge Credit Agreement bore 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.

17 unchanged sentences

The Company incurred additional debt issuance costs and original issuance discounts of $ 0.7 million related to the incremental funding.

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 fiscal year ended December 31, 2023 and the fiscal year ended January 1, 2023 was 5.74 % and 4.93 %, respectively.

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 holds a principal 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.

3 unchanged sentences

Derivative Financial Instruments and Purchase Commitments”.

In September 2023, the Company made an additional $ 4.4 million paydown of the Real Estate Term Loan using net proceeds from the sale of land to a third-party, as discussed within Note 4.

“Property, Plant, and Equipment, Net”, as well as cash on hand.

Following such paydown, the Real Estate Term Loan will amortize approximately $ 3.3 million in principal annually through maturity, subject to any additional advanced paydowns.

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 covenants as of January 1, 2023.

UBH and its subsidiaries were in compliance with its financial covenants as of December 31, 2023.

Long-term debt consisted of the following:

Debt (in thousands)

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

Issue Date Principal Balance Maturity Date December 31, 2023 January 1, 2023

Term loan B (1)

June-21 $ 795,000 January-28 $ 771,335 $ 779,286

Real Estate Loan 88,140 —

Real Estate Loan October-22 88,140 October-32 80,184 88,140

Equipment loans (2)

56,482 54,053

Miscellaneous equipment loans — 697

ABL facility (3)

October-27 368 —

Net impact of debt issuance costs and original issue discounts ( 8,772 ) ( 9,672 )

3 unchanged sentences

(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.

The Company has made the following draws upon these agreements:

$ 26.5 million in fiscal year 2021, $ 32.4 million in fiscal year 2022, and $ 13.1 million in fiscal year 2023.

These draws bear interest ranging from 3.26 % through 7.25 % 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:

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 December 31, 2023 and January 1, 2023, was 9.25 % and 8.25 %, respectively, under the prime rate.

The Company elected 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 December 31, 2023 was 7.19 %.

As of December 31, 2023, the minimum debt repayments under term debt and financing obligations consisted of the following:

(in thousands)

3 unchanged sentences

Term loan B, the Revolving Credit Facility, and the equipment loans are debt of UBH and its’ subsidiaries.

There are no material differences between the financial statements of UBI and consolidated subsidiaries and the financial statements of UBH and consolidated subsidiaries, except for the Warrant liability and associated gain (loss) on remeasurement of warrant liability as described in "Note 17.

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

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

There are no material differences between the financial statements of UBI and its consolidated subsidiaries and the financial statements of UBH and its consolidated subsidiaries, except for the warrant liability and associated gain (loss) on remeasurement of warrant liability as described in "Note 17.

"Warrants,” the Tax Receivable Agreement described in "Note 15.

Income Taxes” 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.

These transactions were accounted for as contract terminations and asset purchases and resulted in expense of $ 23.0 million for the fiscal year 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.

During the first fiscal quarter of 2020, the Company purchased intellectual property that included a deferred purchase price of $ 0.5 million, of which $ 0.2 million and $ 0.3 million was outstanding as of December 31, 2023 and January 1, 2023, respectively.

Amounts outstanding under notes payable consisted of the following:

(in thousands) As of

January 1, 2023

As of January 2, 2022

December 31, 2023 As of January 1, 2023

Note payable – IO notes $ 16,478 $ 21,098

Finance lease obligations (1)

10,145 10,995

Other 200 835

4 unchanged sentences

Leases” for further discussion on our finance lease obligations.

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.

During fiscal year 2021, the Company sold $ 12.5 million of notes receivable from IOs for proceeds of $ 11.8 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 for proceeds of $ 5.0 million to a financial institution.

During fiscal year 2023, the Company sold an additional $ 5.2 million of notes receivable from IOs for proceeds of $ 5.4 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;

8 unchanged sentences

Interest expense consisted of the following:

Successor Predecessor

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

August 29, 2020

January 3, 2021 From

December 30, 2019

August 28, 2020

(in thousands) For the Fiscal Year Ended December 31, 2023 For the Fiscal Year Ended January 1, 2023 For the Fiscal Year Ended January 2, 2022

Company’s ABL facility and other long-term debt $ 57,881 $ 41,231 $ 29,270

4 unchanged sentences

Derivative Financial Instruments

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

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

To reduce the effect of interest rate fluctuations, 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 1.39 % and receive a series of payments based on the greater of LIBOR or 0.00 %.

Both the fixed and floating payment streams were based on a notional amount of $ 250 million and have accreted to $ 500 million and are 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 1.41 %;

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.

On October 12, 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 3.83 % and receive a series of payments based on the greater of the 1-month SOFR or 0.00 %.

The agreement covers $ 84.6 million as of December 31, 2023.

This swap effectively fixes the rate of the Real Estate Term Loan to 5.93 %.

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

The balance that the hedge covers is designed to abate as principal 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 %.

The Company assesses hedge effectiveness both at the onset of the hedge and at regular intervals throughout the life of the derivative instrument.

If it is probable that the hedged forecasted transaction will not occur, the derivative instrument's gain or loss reported in accumulated other comprehensive income will be reclassified into earnings.

As of December 31, 2023, the effective fixed interest rate on the long-term debt hedged by these contracts was 5.88 %.

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

Fair Value Measurements” and "Note 13.

Accumulated Other Comprehensive (Loss) Income.”

Accumulated Other Comprehensive Income.”

Warrant Liabilities

1 unchanged sentence

"Warrants" for additional information on our warrant liabilities.

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

A reconciliation of the changes in the warrant liability during the fiscal year ended December 31, 2023 is as follows:

(in thousands)

1 unchanged sentence

Gain on remeasurement of warrant liability ( 2,232 )

Fair value of warrant liabilities as of January 1, 2023 $ 45,504

Fair value of warrant liabilities as of December 31, 2023 $ 43,272

Purchase Commitments

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

These purchase commitments totaled $ 54.0 million as of January 1, 2023.

These purchase commitments totaled $ 66.7 million as of December 31, 2023 and $ 54.0 million as of January 1, 2023.

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 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 .

The Company has recorded purchase commitment (losses) gains totaling $( 3.3 ) million for the fiscal year ended December 31, 2023, $ 0.0 million for the fiscal year ended January 1, 2023, and $ 1.0 million for the fiscal year ended January 2, 2022, respectively .

FAIR VALUE MEASUREMENTS

13 unchanged sentences

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 1 Level 2 Level 3 Total

3 unchanged sentences

Total assets $ 52,023 $ 33,543 $ — $ 85,566

Commodity contracts $ — $ 2,094 $ — $ 2,094

Interest rate swaps — 1,936 — 1,936

Private placement warrants — 43,272 — 43,272

4 unchanged sentences

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

3 unchanged sentences

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 1, 2023 Year Ended January 2, 2022 From

August 29, 2020

January 3, 2021 From

December 30, 2019

August 28, 2020

(in thousands) Fiscal Year Ended December 31, 2023 Fiscal Year Ended January 1, 2023 Fiscal Year Ended January 2, 2022

RSUs $ 9,705 $ 5,136 $ 8,574

4 unchanged sentences

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.

The tax benefit recognized from the share-based compensation expense is nominal for the fiscal years ended December 31, 2023 and January 2, 2022 due to a valuation allowance.

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

(in thousands) As of January 1, 2023 As of January 2, 2022

(in thousands) As of December 31, 2023 As of January 1, 2023

RSUs $ 7,372 $ 8,710

3 unchanged sentences

Restricted and Performance Share Units

2020 LTIP RSUs

In connection with the Business Combination, the Phantom Units issued under the 2018 LTIP were converted into the 2020 LTIP RSUs issued under the 2020 LTIP, with each RSU vesting on December 31, 2021, provided that if a change in control of Utz, under the terms of the 2020 LTIP occurs prior to December 31, 2021, the 2020 LTIP RSUs will become 100 % vested, unless earlier forfeited under their terms, and representing an unfunded, unsecured promise by the Company to issue a participant one share of Class A Common Stock.

Holders of 2020 LTIP RSUs are subject to substantially similar terms to the holders of Phantom Units, including requisite service period and vesting conditions.

2020 Long-term Incentive Plan ("LTIP") RSUs

In connection with the Business Combination, the Phantom Units issued under the Utz Quality Foods, LLC 2018 Long-Term Incentive Plan (the “2018 LTIP”) were converted into restricted stock units (the “2020 LTIP RSUs”) issued under Utz Quality Foods, LLC 2020 Long-Term Incentive Plan (the “2020 LTIP”), with each 2020 LTIP RSU vesting on December 31, 2021.

Holders of 2020 LTIP RSUs were subject to substantially similar terms to the holders of phantom unit awards issued under the 2018 LTIP (the “2018 LTIP Phantom Units”), including requisite service period and vesting conditions.

The conversion of the 2018 LTIP Phantom Units was accounted for as a modification under ASC 718.

4 unchanged sentences

All 2020 LTIP RSUs settled January 3, 2022.

2020 Omnibus Equity Incentive Plan

In connection with the consummation of the Business Combination, the Company adopted, with stockholder approval, the Utz Brands, Inc.

2020 Omnibus Equity Incentive Plan (as amended, the “2020 Plan”), which provides our executive officers and other participating associates with equity-based, long-term incentives, including RSUs, PSUs and Stock Options.

Restricted Share Units

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.

Under the 2020 Plan, the Company grants 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.

1 unchanged sentence

Performance Share Units

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.

The Company issues 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.

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 that remains 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.

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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

Outstanding at beginning of year $ 267,359 $ 22.13 2.3 Years

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

Outstanding at beginning of fiscal year 2023 1,288,342 $ 18.27 1.8 Years

Granted 746,200 17.44

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Forfeited ( 95,199 ) 17.50

Outstanding and exercisable at end of year $ 1,288,342 $ 18.27 1.8 Years

Outstanding at end of fiscal year 2023 1,461,766 $ 18.28 1.5 Years

Stock Options

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.

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 registration statement on 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.

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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.

For all grants during fiscal year 2022, 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.

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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 %.

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

Treasury zero-coupon issues with an equivalent remaining term.

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.

Options issued under the 2020 Plan are subject to time-based vesting, continued employment, and other conditions outlined in the 2020 Plan with the fair value determined using the Black-Scholes Option Pricing Model.

On January 31, 2022, the Company granted its Executive Leadership Team stock options exercisable for Class A Common Stock of the Company pursuant to the terms set forth above, and 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.

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Treasury zero-coupon issues with an equivalent remaining term.

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

In May 2022, an additional 16,923 stock option 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

Outstanding at beginning of fiscal year 2023 522,203 $ 5.60 1.8 Years

Vested ( 127,730 ) —

Forfeited — —

Outstanding and exercisable at end of year 522,203 $ 5.60 1.8 Years 0.00

Outstanding and exercisable at end of fiscal year 2023 394,473 $ 6.01 1.0 Year 0.00

(1) The aggregate intrinsic value in the above table represents the total pre-tax amount that a participant would receive if the option had been exercised on the last day of the respective fiscal period.

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On December 10, 2020, the Board of Directors approved the 2021 Employee Stock Purchase Plan ("ESPP”), subject to stockholder approval.

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

The ESPP was effective January 1, 2021, and any purchase rights that were granted under the ESPP prior to stockholder approval could not be exercised unless and until stockholder approval was obtained.

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

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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.

The ESPP permits participants to purchase the Company’s Class A Common Stock at a purchase price of 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, 92.5 % in 2022 and 95 % in 2023.

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.

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.

As of December 31, 2023, 1,133,522 shares of Class A common stock remain available for issuance under the ESPP.

For the fiscal year ended December 31, 2023, the Company granted 99,788 shares with a fair value of $ 1.5 million, and the Company recognized compensation expense of $ 0.3 million.

For the fiscal 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 fiscal 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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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.

On January 7, 2022, the Company settled the audit with the Commonwealth of Pennsylvania for $ 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 $ 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 outstanding balance of loans guaranteed was $ 0.7 million and $ 1.5 million at December 31, 2023 and January 1, 2023, 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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The Company partially guarantees loans made to IOs by Bank of America for the purchase of routes.

The outstanding balance of loans guaranteed that were issued by Bank of America was $ 36.0 million and $ 18.6 million at January 1, 2023 and January 2, 2022, respectively, which are accounted for as an off balance sheet arrangement.

The outstanding balance of loans guaranteed that were issued by Bank of America was $ 52.8 million and $ 36.0 million at December 31, 2023 and January 1, 2023, respectively, which are accounted for as an off balance sheet arrangement.

As discussed in "Note 8.

Long-Term Debt”, the Company also sold notes receivable on its books to Bank of America during fiscal year 2021, fiscal year 2022 and fiscal year 2023, 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.

The outstanding balance of notes purchased by Bank of America at December 31, 2023 and January 1, 2023 was $ 14.8 million and $ 17.9 million, respectively.

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;

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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 $ 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.

The outstanding balance of loans guaranteed was $ 2.2 million and $ 3.4 million at December 31, 2023 and January 1, 2023, 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.

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The audit consists of three components including accounts payable, payroll, and 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)

Total accumulated other comprehensive income was $ 51.0 million as of January 1, 2023 and $ 3.7 million as of January 2, 2022.

Total accumulated other comprehensive income (loss) consists solely of unrealized gains (losses) from the Company’s derivative financial instruments accounted for as cash flow hedges.

Changes to the balance in accumulated other comprehensive income (loss) were as follows:

(in thousands) Gains on

As of early fiscal year 2023, the Company settled the audit with the various jurisdictions for $ 0.1 million.

ACCUMULATED OTHER COMPREHENSIVE INCOME

Total accumulated other comprehensive income was $ 37.5 million as of December 31, 2023 and $ 51.0 million as of January 1, 2023.

Total accumulated other comprehensive income consists solely of unrealized gains (losses) from the Company’s derivative financial instruments accounted for as cash flow hedges.

Changes to the balance in accumulated other comprehensive income were as follows:

(in thousands) Gains (Losses) on

Cash Flow Hedges

Balance as of August 29, 2020 $ —

Unrealized gain on cash flow hedges 924

Balance as of January 3, 2021 $ 924

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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

Cash Flow Hedges

Balance as of December 29, 2019 $ 1,408

Unrealized loss on cash flow hedges ( 13,543 )

Balance as of August 28, 2020 $ ( 6,055 )

Balance as of December 31, 2023 37,451

Less balance attributable to noncontrolling interest as of December 31, 2023 ( 14,493 )

Balance attributable to controlling interest as of December 31, 2023 $ 22,958

SUPPLEMENTARY CASH FLOW INFORMATION

(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

(in thousands) For the Fiscal Year Ended December 31, 2023 For the Fiscal Year Ended January 1, 2023 For the Fiscal Year Ended January 2, 2022

Cash paid for interest $ 46,905 $ 41,711 $ 31,638

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Payments for income taxes $ 8,820 $ 6,988 $ 3,653

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

Utz Brands Holdings, LLC is treated as a partnership for federal income tax purposes, and for most applicable state and local income tax purposes, and generally does not pay income taxes in most jurisdictions.

Instead, Utz Brands Holdings, LLC taxable income or loss is passed through to its members, including the Company.

Despite its partnership treatment, Utz Brands Holdings, LLC is liable for income taxes in those states not recognizing its pass-through status and for certain of its subsidiaries not taxed as pass-through entities.

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

UBH is treated as a partnership for federal income tax purposes, and for most applicable state and local income tax purposes, and generally does not pay income taxes in most jurisdictions.

Instead, UBH taxable income or loss is passed through to its members, including the Company.

Despite its partnership treatment, UBH is liable for income taxes in those states not recognizing its pass-through status and for certain of its subsidiaries not taxed as pass-through entities.

The Company has acquired various domestic entities taxed as corporations, which are now wholly-owned by us or our subsidiaries.

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

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

Successor Predecessor

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

(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

For the Fiscal Year Ended December 31, 2023 For the Fiscal Year Ended January 1, 2023 For the Fiscal Year Ended January 2, 2022

Federal $ 7,816 $ 4,038 $ 1,553

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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 1, 2023 Year Ended January 2, 2022 From

August 29, 2020

January 3, 2021 From

December 30, 2019

August 28, 2020

(in thousands) For the Fiscal Year Ended December 31, 2023 For the Fiscal Year Ended January 1, 2023 For the Fiscal Year Ended January 2, 2022

Federal statutory rate (21%) $ ( 8,248 ) $ ( 7,972 ) $ 3,378

State income taxes, net of federal benefit ( 528 ) ( 2,435 ) 6,440

Pre-transaction loss of Utz Brands Holdings, LLC — — — 1,752

Investment in Utz Brands Holdings, LLC 31 ( 31 ) ( 23,844 ) —

Noncontrolling interest in Utz Brands Holdings, LLC 2,792 2,448 1,497 —

Investment in UBH 177 31 ( 31 )

Noncontrolling interest in UBH 2,610 2,792 2,448

Valuation allowance 5,878 ( 17,177 ) 5,195

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$ 757 $ ( 23,919 ) $ 8,086

The tax effect of temporary differences that gave rise to significant components of deferred tax assets and liabilities consisted of the following at January 1, 2023 and January 2, 2022:

The tax effect of temporary differences that gave rise to significant components of deferred tax assets and liabilities consisted of the following at December 31, 2023 and January 1, 2023:

(in thousands)

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

As of December 31, 2023 As of January 1, 2023

Deferred Tax Assets:

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Inventories, including uniform capitalization 145 320

Investment in Utz Brands, LLC, operations 25,237 25,454

Investment in UBH, operations 20,943 25,237

Acquisition costs 592 708

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Intangibles ( 66,556 ) ( 71,883 )

Investment in Utz Brands Holdings, LLC, nonreversing ( 68,957 ) ( 51,455 )

Investment in UBH, nonreversing ( 63,900 ) ( 68,957 )

Other deferred tax liabilities ( 239 ) ( 249 )

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Net deferred tax liabilities $ ( 114,690 ) $ ( 124,802 )

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

As of January 1, 2023 and January 2, 2022, the Company and certain subsidiaries have federal net operating loss ("NOL") carryforwards of $ 93.6 million and $ 96.1 million, respectively.

As of December 31, 2023 and January 1, 2023, the Company and certain subsidiaries had federal net operating loss ("NOL") carryforwards of $ 102.2 million and $ 93.6 million, respectively.

Of these, $ 30.7 million will expire, if not utilized, by 2037.

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.

As of December 31, 2023 and January 1, 2023, the Company and certain subsidiaries also had state NOL carryforwards in the amount of $ 48.1 million and $ 45.9 million, respectively.

The state NOL carryforwards continue to expire in 2023, 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 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.

As of December 31, 2023 and January 1, 2023, the Company and certain subsidiaries had federal tax credit carryforwards in the amount of $ 0.7 million and $ 0.4 million, respectively.

As of December 31, 2023 and January 1, 2023, certain subsidiaries had 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 Code and similar state provisions.

The annual limitations may result in the expiration of net operating losses and credits before utilization.

Valuation Allowance

The Company recorded a valuation allowance of $ 27.3 million and $ 43.5 million at January 1, 2023 and January 2, 2022, respectively.

The Company recorded a valuation allowance of $ 36.9 million and $ 27.3 million at December 31, 2023 and January 1, 2023, respectively.

In determining the need for a valuation allowance, the Company assessed the available positive and negative evidence to estimate whether future taxable income would be generated to permit use of the existing deferred tax assets ("DTA's”).

As of January 1, 2023, a significant piece of objective negative evidence evaluated was the three-year cumulative loss before taxes.

As of December 31, 2023, a significant piece of objective negative evidence evaluated was the three-year cumulative loss before taxes.

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

The Company determined that there is uncertainty regarding the utilization of certain DTA's such as 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.

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

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

The Company has DTA’s related to its investment in partnership that are expected to be realized in the ordinary course of operations or generate future net operating losses for which a portion will have an indefinite carryforward period.

The Company has DTA’s related to its investment in the partnership that are expected to be realized in the ordinary course of operations or generate future net operating losses for which a portion will have an indefinite carryforward period.

Additionally, the Company has deferred tax liabilities ("DTL’s”) related to its investment in the partnership that will not reverse in the ordinary course of business and will only reverse when the partnership is sold or liquidated.

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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 $ 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.

The net change in valuation allowance of $ 9.6 million was recorded as an increase to income tax expense for $ 6.4 million and an adjustment to equity for $ 3.2 million.

As of December 31, 2023, tax years 2020 through 2023 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 2019 through 2023 remain open and subject to examination in selected states that have a four year statute of limitations.

Upon audit, tax authorities may challenge all or part of a tax position.

A tax position successfully challenged by a taxing authority could result in an adjustment to our provision for income taxes in the period in which a final determination is made.

The Company did not maintain any unrecognized tax benefits as of January 1, 2023 and January 2, 2022.

The Company did not maintain any unrecognized tax benefits as of December 31, 2023 and January 1, 2023.

Tax receivable agreement liability

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

Pursuant to an election under section 754 of the 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 a third party then holding common and preferred interests of the Continuing Members and purchased UBH units from the Continuing Members per the Business Combination Agreement.

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.

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

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").

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

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

The timing and amount of aggregate payments due under the TRA may vary based on a number of factors, including the timing and amount of taxable income generated by the Company each year, as well as the tax rate then applicable, among other factors.

As of January 1, 2023, the Company recorded a TRA liability of $ 25.4 million, but it has a total liability of $ 39.8 million related to its projected obligations under the TRA.

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 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.

As of December 31, 2023, the Company recorded a TRA liability of $ 24.3 million, but it has a total liability of $ 38.5 million related to its projected obligations under the TRA.

The total TRA liability includes $ 24.3 million that relates to payments that originated with the Business Combination and the acquisition of Kennedy and $ 14.2 million that relates to equity transactions that occurred during the fourth quarter of 2020 and third quarter of 2021.

The Company recorded a partial valuation allowance on its DTA, that fully covers the tax basis that originated with the equity transactions that occured during the fourth quarter of 2020 and third quarter of 2021 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 $ 14.2 million of TRA liability that relates to the equity transactions that occured during the fourth quarter of 2020 and third quarter of 2021 as the liability is not probable under ASC 450 since the related DTA is not more likely than not to be realized as evidenced by the valuation allowance.

The Company will continue to monitor positive and negative evidence to analyze its valuation allowance and it believes that sufficient positive evidence may arise to permit the release of a significant portion of its valuation allowance.

If that were to occur, it would result in the need to record $ 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.

If that were to occur, it would result in the need to record $ 14.2 million of additional TRA liability for the equity transactions that occured during the fourth quarter of 2020 and third quarter of 2021, which would result in a non-cash charge to pretax results.

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

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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 years ended January 1, 2023 and January 2, 2022:

The following table presents lease expense we have recorded on our consolidated statements of operations for the fiscal years ended December 31, 2023, January 1, 2023 and January 2, 2022:

(in thousands)

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

For the Fiscal Year Ended December 31, 2023 For the Fiscal Year Ended January 1, 2023 For the Fiscal Year Ended January 2, 2022

Finance lease expense:

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Operating lease expense (1)

22,437 16,679 9,118

Total lease expense $ 25,960 $ 19,582 $ 11,925

(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:

(1) Included variable and short-term lease expense of $ 4.6 million and $ 5.3 million, respectively, for the fiscal year ended December 31, 2023, $ 3.2 million and $ 3.8 million, respectively, for the fiscal year ended January 1, 2023 and $ 2.1 million and $ 3.4 million, respectively, for the fiscal year ended January 2, 2022.

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

(in thousands)

January 1, 2023 As of

December 31, 2023 As of

January 1, 2023

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Leases, net $ 9,949 $ 10,769

Maturities of lease liabilities as of January 1, 2023:

Maturities of lease liabilities as of December 31, 2023:

(in thousands)

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2029 and thereafter

5,690 167 5,857

Total undiscounted obligations

3 unchanged sentences

$ 58,920 $ 10,145 $ 69,065

(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 1, 2023 and January 2, 2022:

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

The following table summarizes supplemental balance sheet information related to leases as of December 31, 2023 and January 1, 2023:

As of December 31, 2023 As of January 1, 2023

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

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(1) Finance ROU assets are reflected within property, plant, and equipment, net on our consolidated balance sheets and operating leases ROU assets are reflected within other assets on our consolidated balance sheets.

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

Fiscal Year Ended January 1, 2023

The following table presents other information related to leases for the fiscal year ended December 31, 2023, January 1, 2023 and January 2, 2022 (in thousands):

For the Fiscal Year Ended December 31, 2023 For the Fiscal Year Ended January 1, 2023 For the Fiscal Year Ended January 2, 2022

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

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Leased assets obtained in exchange for new lease liabilities:

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.

All other features of the warrants remain unchanged.

On December 14, 2020, the Company provided notice to the holders of the Public Warrants and Forward Purchase Warrants that their warrants would be redeemed in accordance with the original terms on January 14, 2021.

As of January 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 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.

Additionally, the Private Placement Warrants are exercisable on a cashless basis, at the holder’s option, and are non-redeemable by the Company so long as they are held by the initial purchasers or their permitted transferees.

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

Operating leases

$ 26,315 $ 24,958 $ 11,412

Finance leases

$ 2,761 $ 6,379 $ 2,157

As a result of the Business Combination, the Company assumed 7,200,000 Private Placement Warrants that were initially issued to the Sponsor simultaneously with the closing of its initially public offering that are exercisable for shares of UBI Class A Common Stock.

The Private Placement Warrants have a term of five years and expire in August 2025.

As of December 31, 2023 and January 1, 2023, there were 7,200,000 Private Placement Warrants outstanding.

The Private Placement Warrants are exercisable on a cashless basis, at the holder’s option, and are non-redeemable by the Company so long as they are held by the initial purchasers or their permitted transferees.

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).

Pursuant to ASC 815-40, the Warrants are 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 $ 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 December 30, 2019 to August 28, 2020.

SIGNIFICANT CUSTOMERS

The following tables represents our net sales concentrations and accounts receivable concentration for our three largest customers by net sales.

Net sales concentrations:

Successor Predecessor

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

August 29, 2020

January 3, 2021 From

December 30, 2019

August 28, 2020

Customer A 12 % 15 % 11 % 12 %

Customer B 6 7 5 4

Customer C 3 4 4 5

Total net sales concentrations 21 % 26 % 20 % 21 %

Accounts receivable concentrations:

Customer As of

January 1, 2023 As of

January 2, 2022 As of

January 3, 2021

Customer A 11 % 10 % 11 %

Customer B 5 6 5

Customer C 4 4 4

Total accounts receivable concentrations:

20 % 20 % 20 %

BUSINESS RISK

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

We have taken necessary preventive actions and implemented additional measures to protect our 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.

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

We continue to monitor customer and consumer demands, and intend to adapt our plans as needed to continue to meet these demands.

The remeasurement of the warrant liability resulted in a gain of $ 2.2 million for the fiscal year ended December 31, 2023 and $ 0.7 million for the fiscal year ended January 1, 2023, and $ 36.7 million for the fiscal year ended January 2, 2022.

Such gains are not attributable to the noncontrolling interest.

Class A Common Stock

The Company is authorized to issue 1,000,000,000 shares of Class A Common Stock, par value $ 0.0001 per share, of which 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 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.

The Company is authorized to issue 1,000,000,000 shares of Class A Common Stock, par value $ 0.0001 per share, of which 81,187,977 and 80,882,334 shares of UBI were issued and outstanding as of December 31, 2023 and January 1, 2023, respectively.

Class V Common Stock

The Company is also authorized to issue 61,249,000 shares of Class V Common Stock, par value of $ 0.0001 all of which were issued to the Continuing Members in connection with the closing of the Business Combination, as described in Note 2.

"Acquisitions”.

Each of the Continuing Members' common limited liability company units of UBH along with a share of Class V Common Stock may be exchanged for one share of Class A Common Stock of the Company upon certain restrictions being satisfied, as described in Note 2.

"Acquisitions”.

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

As of both December 31, 2023 and January 1, 2023 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.

The Company did not receive any proceeds as a result of this exchange.

Forward Purchases

In connection with the closing of the Business Combination and pursuant to 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

Basic earnings per share is based on the weighted average number of shares of Class A Common Stock issued and outstanding during the Successor period.

Diluted earnings per share is based on the weighted average number shares of Class A Common Stock issued and outstanding and the effect of all dilutive common stock equivalents and potentially dilutive share-based awards outstanding during the Successor period.

For the Successor period, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Company's net loss position.

Basic earnings per share is based on the weighted average number of shares of Class A Common Stock issued and outstanding.

There is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Company's net loss position.

The potentially dilutive securities that would be anti-dilutive due to the Company's net loss are not included in the calculation of diluted net loss per share attributable to controlling interest.

2 unchanged sentences

"Share-Based Compensation" for further information on the share-based awards considered in the diluted EPS computation.

Given the historical partnership equity structure of UBH, the Company determined that the calculation of earnings per membership unit results in values that are not a valuable metric to users of these consolidated financial statements.

Therefore, EPS information is omitted for the Predecessor periods.

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

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

Basic earnings per share $ 0.26

Diluted earnings per share:

Net income attributable to controlling interest $ 20,555

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

(in thousands, except share data) For the Fiscal Year Ended December 31, 2023 For the Fiscal Year Ended January 1, 2023 For the Fiscal Year Ended January 2, 2022

Net income (loss) attributable to controlling interest $ ( 24,937 ) $ ( 392 ) $ 20,555

Weighted average Class A Common Stock shares, basic 81,081,458 80,093,094 76,677,981

2 unchanged sentences

RSUs — — 1,055,003

PSUs — — 32,256

Stock options — — 8,867

Total diluted weighted average shares 81,090,229

Total dilutive weighted average shares 81,081,458 80,093,094 81,090,229

Basic earnings per share $ ( 0.31 ) $ — $ 0.26

Diluted earnings per share $ ( 0.31 ) $ — $ 0.25

1 unchanged sentence

Net loss attributable to noncontrolling interest $ 15,095 $ 13,649 12,557

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.

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

(in thousands)

For the Fiscal Year Ended December 31, 2023 For the Fiscal Year Ended January 1, 2023 For the Fiscal Year Ended January 2, 2022

Warrants 1,882,627 1,888,256 —

RSUs 271,330 83,261 —

PSUs 125,958 62,408 —

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 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.

The PSUs, RSUs granted to our directors and certain employees in fiscal year 2020, and 2020 LTIP RSUs were not considered participating securities 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 December 31, 2023 and January 1, 2023, 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 $ 15.1 million for the fiscal year ended December 31, 2023, $ 13.6 million for the fiscal year ended January 1, 2023, and net loss attributable to non-controlling interest of $ 12.6 million for the fiscal year ended January 2, 2022, respectively.

SUBSEQUENT EVENTS

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.

On February 5, 2024, the Company sold certain assets and brands to affiliates of Our Home™, an operating company of Better-for-You brands (“Our Home”).

Under the agreement, affiliates of Our Home agreed to purchase the Good Health® and R.W.

Garcia® brands, the Lincolnton, NC, and Lititz, PA manufacturing facilities and certain related assets, and assume the Company’s Las Vegas, NV facility lease and manufacturing operations.

In addition, the Company and Our Home will operate under a Transition Services Agreement for 12 months.

The total consideration for the transactions is $ 182.5 million, subject to customary adjustments.

In addition, post-closing, the parties will operate under reciprocal co-manufacturing agreements under which Our Home will co-manufacture certain of the Company's products and the Company will co-manufacture certain Good Health® products.

Certain Good Health® products will continue to be distributed and sold on the Company's DSD network for Our Home.

At this time, the Company cannot estimate the impact of this transaction on its consolidated 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