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Item 7. Management’s Discussion and Analysis

2025-02-20 compared with 2024-02-29 · 181 added, 149 removed, 215 unchanged (61% of the section changed)

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and related notes included in Item 8 of this Annual Report on Form 10-K.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Audited Financial Statements and related notes included in Item 8 of this Annual Report on Form 10-K.

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

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

Our fiscal year 2021 ended January 2, 2022 and was a fifty-two-week fiscal year, our fiscal year 2022 ended January 1, 2023 and was a fifty-two-week fiscal year, and our fiscal year 2023 ended December 31, 2023 and was a fifty-two-week fiscal year.

Our fiscal year 2022 ended January 1, 2023 and was a fifty-two-week fiscal year, our fiscal year 2023 ended December 31, 2023 and was a fifty-two-week fiscal year and our fiscal year 2024 ended December 29, 2024 and was a fifty-two-week fiscal year.

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

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

We are a leading United States manufacturer of branded salty snacks, producing a broad offering of salty snacks, including potato chips, tortilla chips, pretzels, cheese snacks, veggie snacks, pork skins, pub/party mixes, and other snacks.

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

We were founded in 1921 in Hanover, Pennsylvania and benefit from over 100 years of brand awareness and heritage in the salty snack industry.

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

households as of December 29, 2024.

As of December 31, 2023, we operate 14 manufacturing facilities across the United States with a broad range of capabilities.

As of December 31, 2023, our products are distributed nationally to grocery, mass merchant, club, convenience, drug and other retailers through direct shipments, distributors, and approximately 2,250 direct-store-delivery (“DSD”) routes.

As of December 29, 2024, we operate eight primary manufacturing facilities across the United States with a broad range of capabilities.

Our products are distributed nationally to grocery, mass merchant, club, convenience, drug and other retailers through direct shipments, distributors, and approximately 2,500 direct-store-delivery (“DSD”) routes.

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

Based on 2023 retail sales, we are the second-largest producer of branded salty snacks in our core geographies where we have acquired strong regional brands and distribution capabilities in recent years.

Based on 2024 retail sales, we are the second-largest producer of branded salty snacks in our collective core geographies where we have acquired strong regional brands and distribution capabilities in recent years.

Key Developments and Trends

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

Growth Strategy - We have a long-term growth strategy focusing on various initiatives and have experienced share gains in our Expansion geographies over the past six consecutive quarters with retail sales and retail volumes being up by 0.9% and 0.4%, respectively, for the fiscal year ended December 29, 2024.

Our portfolio strategy is focused on accelerating investments in marketing and innovation to drive top-line growth and achieve share gains in the attractive Salty Snack category.

We plan to further penetrate our Expansion Geographies and untapped channels and customers by further expanding our Branded Salty Snacks in Expansion Geographies, as well as maintaining our share in our Core Geographies.

Our Core Geographies retail sales and retail volumes were down 1.6% and up 0.6%, respectively, for the fiscal year ended December 29, 2024.

Long-Term Demographics, Consumer Trends, and Demand – We participate in the attractive and growing $39 billion U.S.

salty snacks category, within the broader approximately $130 billion market for U.S.

snack foods as of December 31, 2023.

The salty snacks category has grown retail sales at an approximate 10.1% compound annual growth rate ("CAGR") during 2019 through 2023 with a major spike in 2020 driven by consumption following the outbreak of the novel coronavirus ("COVID-19") and again from 2022 through 2023 driven by inflation.

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

A 2023 study from Circana cites that 54% of consumers eat snacks to add excitement to their daily diet, up two points versus two years ago and that 49% of consumers snack three or more times per day, up four points versus two years ago.

snack foods as of December 29, 2024, based on Circana data.

The salty snacks category has grown retail sales at an approximate 7.8% compound annual growth rate ("CAGR") during 2020 through 2024 with a major spike in 2020 driven by consumption following the outbreak of the novel coronavirus ("COVID-19") and again from 2022 through 2023 driven by inflation, per Circana.

In the last few years snacking occasions have held relatively stable as consumers continue to seek out convenient, delicious snacks for both on-the-go and at-home lifestyles.

A 2024 study from Circana cites that 46% of consumers snack three or more times a day, down three points compared to a year ago but with no change versus five years ago.

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

We expect these consumer trends to continue to drive consistent retail sales growth for salty snacks for the foreseeable future.

We expect these consumer trends to continue to drive consistent retail sales for salty snacks for the foreseeable future.

For the year ended December 29, 2024, U.S.

retail sales for salty snacks based on Circana data increased by 0.7% versus the comparable prior year period while our retail sales increased 1.6%.

The 2 year CAGR during 2022 and 2023 was 12.2% for U.S.

The two year CAGR during 2023 and 2024 was 4.5% for U.S.

retail sales of salty snacks, during which time our retail sales increased by 3.6%.

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

Additionally, during 2024, certain competitors began to take certain discrete pricing actions in specific channels, resulting in an environment that has become far more promotional.

Such promotions have impacted our sales and, in response, we have increased our promotional activities.

We expect these pricing and promotional activity dynamics to continue in the near-term.

Within the potato chips subcategory, our share performance was impacted by the softness in our Utz brand due to competitive activity, along with softness in our Zapp’s® and Golden Flake® business.

Importantly, Boulder Canyon® gained share led by strong same store velocities in both traditional channels and in the natural channel, with growth of 34.9% and 32.7%, respectively, per Circana.

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

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

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

The CARES Act is an approximately $2 trillion emergency economic stimulus package in response to the COVID-19 outbreak, which among other things contains numerous income tax provisions.

Some of these tax provisions are effective retroactively for years ending before the date of enactment.

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

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

On August 16, 2022, the U.S.

enacted the Inflation Reduction Act of 2022 (“Inflation Reduction Act”), which, among other things, implemented a 15% minimum tax on book income of certain large corporations, a 1% excise tax on net stock repurchases and several tax incentives to promote clean energy.

The Company continues to evaluate the impact of the Inflation Reduction Act;

however, we believe it is unlikely to have a material effect on our consolidated financial position, results of operations, and cash flow.

Financing Costs and Exposure to Interest Rate Changes – As of December 31, 2023, we had $851.5 million in variable rate indebtedness, down from $867.4 million as of January 1, 2023.

Financing Costs and Exposure to Interest Rate Changes – As of December 29, 2024, we had $690.1 million in variable rate indebtedness, down from $851.5 million as of December 31, 2023.

The decrease in variable rate debt is primarily due to a $141.0 million payment made in connection with the Good Health and R.W.

Garcia Sale (as defined below) and the Manufacturing Facilities Sale (as defined below), each as described in Note 2.

Divestitures and Note 4.

Property, Plant and Equipment, Net to our Audited Financial Statements, toward the outstanding balance of the Term Loan B (as defined below) and a $17.7 million payment toward the outstanding balance of the loan by City National Bank, which is secured by a majority of the real estate assets of our subsidiaries through September 2032 (the “Real Estate Term Loan”).

As of December 29, 2024, our variable rate indebtedness was benchmarked to the Term SOFR Screen Rate (“SOFR”).

As of December 31, 2023, we have entered into interest rate hedges covering $584.6 million of debt, of which, $500.0 million is covered through September 30, 2026 and a hedge that covers the outstanding principal balance of the loan by City National Bank which is secured by a majority of the real estate assets of the our subsidiaries (the “Real Estate Term Loan”) (Refer to Note 8.

“Long-Term Debt.”) to our audited consolidated financial statements included under Part II, Item 8 of this Annual Report on Form 10-K (our “Audited Financial Statements”)) through September 2032.

As of December 29, 2024, we have existing interest rate swaps totaling $581.1 million of debt.

Our interest rate hedge strategy has limited some of our exposure to changes in interest rates.

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

Our weighted average interest rate for the fiscal year ended December 31, 2023 was 6.3%, up from 4.7% during the fiscal year ended January 1, 2023.

Our weighted average interest rate for the fiscal year ended December 29, 2024 was 5.5%, down from 6.3% during the fiscal year ended December 31, 2023.

On January 29, 2025, the Company amended its Term Loan B to refinance in full all of the $630.3 million outstanding term loan, reduce the interest rate from SOFR plus the applicable rate of 2.75% to SOFR plus the applicable rate of 2.50% and extend the maturity date from January 20, 2028 to January 29, 2032, as well as make certain other changes.

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

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Derivative Financial Instruments and Purchase Commitments to our Audited Financial Statements for additional information on debt, derivative and purchase commitment activity.

The Company has experienced the effect of increased interest rates on the portion of its debt that is not hedged and continued rising interest rates could negatively impact our net income.

The Company has experienced the effect of increased interest rates on the portion of its debt that is not hedged and an increase in interest rates could negatively impact our net income.

Recent Developments and Significant Items Affecting Comparability

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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 fiscal year 2023 and 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 $1.5 million and $23.0 million for the fiscal years ended December 31, 2023 and January 1, 2023, respectively.

Commodity Trends

During fiscal years 2024, 2023 and 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 asset purchases and contract terminations, respectively, and resulted in expense of $2.1 million, $1.5 million and $23.0 million for the fiscal years ended December 29, 2024, December 31, 2023 and January 1, 2023, respectively.

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 purchased the Good Health and R.W.

Garcia brands, the Lincolnton, NC and Lititz, PA manufacturing facilities and certain related assets, and assumed the Company’s Las Vegas, NV facility lease and manufacturing operations (the "Good Health and R.W.

Garcia Sale"), for $167.5 million, subject to customary adjustments.

Divestitures to our Audited Financial Statements.

On April 22, 2024, the Company sold to Our Home its Berlin, PA and Fitchburg, MA manufacturing facilities and certain related assets, including certain inventory (the “Manufacturing Facilities Sale”).

The total consideration for the transactions was $18.5 million, subject to customary adjustments.

The Company and Our Home are operating under transition services agreements related to each of the Good Health and R.W.

Garcia Sale and the Manufacturing Facilities Sale, which are scheduled to expire during the first half of 2025.

In addition, the parties will operate under reciprocal co-manufacturing agreements pursuant to 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, pursuant to a distribution agreement.

The Company received approximately $18.7 million in advance from Our Home for certain terms under these agreements, which the Company will recognize through income from operations over the terms of the transition services and co-manufacturing agreements.

Product Innovation

Investments in new product innovation support three focus areas that are rooted in the consumer and tied to our portfolio and brand strategy:

Expanding Positive Choices, Delivering Craveable Flavor, and Capturing Occasions.

Within Expanding Positive Choices, 2024’s focus was on the Boulder Canyon, a brand offering solutions for consumers seeking great tasting BFY snacks via BFY oils such as avocado oil and olive oil.

Innovation contributed to the brand’s 32.7% growth in the natural channel in 2024 with the launching of new flavors that capitalized on the hot & spicy trend and by entrance into the cheese snack subcategory.

Within Delivering Craveable Flavor, in 2024, we addressed consumer desire for flavor exploration with innovation across brands and snacking subcategories via our seasoned pretzels and new potato chip flavor offerings in both our Utz and Zapp’s brands.

Within Capturing Occasions, in 2024, we introduced a portfolio of variety/multipacks across our Power Four Brands and our Targeted Brands.

Supply and Commodity Trends

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

A number of external factors such as weather, which may be impacted in unanticipated ways due to climate change, commodity market conditions, and the effects of governmental, agricultural or other programs, may affect the cost and availability of raw materials and agricultural materials used in our products.

A number of external factors such as weather, which may be impacted in unanticipated ways due to climate change, commodity market conditions, inflationary conditions and the effects of governmental, agricultural or other programs, may affect the cost and availability of raw materials and agricultural materials used in our products.

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

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however, we may not be able to fully hedge against commodity cost changes, where there is a limited ability to hedge, and our hedging strategies may not protect us from increases in specific raw material costs.

We experienced an increase in pricing in certain commodity trends that continued to rise throughout fiscal year 2022 and have since stabilized during fiscal year 2023.

We experienced an increase in pricing in certain commodity trends that continued to rise throughout fiscal year 2022 and have since stabilized during fiscal years 2023 and 2024.

Commodity cost increases in commodity trends may adversely impact our net income.

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

Although we have experienced some ingredient cost deflation, we continue to experience rising costs related to fuel and freight rates as well as rising labor costs which have negatively impacted profitability.

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

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

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

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

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

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Independent Operator Conversions

Our DSD distribution is executed via company-owned routes operated by RSPs, and third-party routes managed by IOs.

Our DSD distribution is executed via Company-owned routes operated by RSP, and third-party routes managed by IOs.

We have used the IO and RSP models for more than a decade.

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As of December 29, 2024, substantially all of our DSD routes are managed by IOs.

As of January 1, 2023, the mix between IOs and RSPs was approximately 93% and 7%, respectively.

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

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

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

The net impact is a reduction in selling expenses and a decrease in net sales and gross profit.

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

Controls and Procedures

Prior to the consummation of the Business Combination, we were not required to comply with the SEC’s rules implementing Section 404 of the Sarbanes-Oxley Act and were therefore not required in connection with periods ended prior to the consummation of the Business Combination to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose.

Since the consummation of the Business Combination, we are required to comply with the SEC’s rules implementing Section 302 of the Sarbanes-Oxley Act, which require our management to certify financial and other information in our quarterly and annual reports.

We were required to provide an annual management report on the effectiveness of our internal control over financial reporting beginning with our annual report for the fiscal year ended January 3, 2021.

Beginning with the fiscal year ended January 2, 2022, our independent registered public accounting firm was required to assess and attest to the effectiveness of our internal control over financial reporting.

While we expect to have a small number of routes under the ownership of the Company as we acquire and re-sell routes as part of our normal operations, as of December 29, 2024, substantially all of our DSD routes are managed by IOs.

Results of Operations

The following tables present selected financial data for the fiscal year ended December 31, 2023 and fiscal year ended January 1, 2023.

We have prepared our discussion of the results of operations by comparing the results for the fiscal year ended December 31, 2023 to the results of operations for the fiscal year ended January 1, 2023.

Refer to Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations , in our Annual Report on Form 10-K for the fiscal year ended January 1, 2023, for discussion of the results of operations for the fiscal year ended January 1, 2023, compared to the fiscal year ended January 2, 2022, which is incorporated by reference herein.

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

The following tables present selected financial data for the fiscal year ended December 29, 2024 and fiscal year ended December 31, 2023.

We have prepared our discussion of the results of operations by comparing the results for the fiscal year ended December 29, 2024 to the results of operations for the fiscal year ended December 31, 2023.

Refer to Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations , in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 , for discussion of the results of operations for the fiscal year ended December 31, 2023, compared to the fiscal year ended January 1, 2023, which is incorporated by reference herein.

(in millions)

For the Fiscal Year Ended December 29, 2024 For the Fiscal Year Ended December 31, 2023

Net sales $ 1,409,281 $ 1,438,237

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Other (expense) income

Gain on sale of business

Interest expense (44,862) (60,590)

Loss on debt extinguishment

Other income 2,457 3,066

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10,561 (55,292)

Loss before income taxes

Income (loss) before income taxes

69,467 (39,275)

Income tax expense (benefit)

Income tax expense

Net income (loss)

30,737 (40,032)

Net loss attributable to noncontrolling interest 15,095 13,649

Net loss attributable to controlling interest

Net (income) loss attributable to noncontrolling interest

(14,763) 15,095

Fiscal Year Ended December 31, 2023 versus Fiscal Year Ended January 1, 2023

Net sales were $1,438.2 million for the fiscal year ended December 31, 2023 and $1,408.4 million for the fiscal year ended January 1, 2023.

Net sales for the fiscal year ended December 31, 2023 increased $29.8 million or 2.1% over the fiscal year 2022.

The increase in net sales for the fiscal year ended December 31, 2023 was primarily related to the flow-through of pricing actions that were taken in 2022 in response to inflationary pressures which accounted for a 4.6% increase in net sales, partially offset by a volume/mix decline of 1.8% due to SKU rationalization as well as 0.7% decline in net sales related to continued IO conversions.

IO discounts increased from $156.8 million for the fiscal year ended January 1, 2023 to $179.3 million for the corresponding fiscal year ended December 31, 2023.

Excluding the impacts of increased IO discounts related to IO conversions, organic net sales increased 2.8% for the fiscal year ended December 31, 2023 versus the fiscal year ended January 1, 2023.

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

Our Power Brands are comprised of our iconic heritage Utz brand and iconic On The Border® brand;

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

BFY brands such as Boulder Canyon ®;

strong regional snacking brands such as Bachman®, Tim’s Cascade® Snacks, and "Dirty" Potato Chips®;

and selected licensed brands such as TGI Fridays ®.

Our Foundation Brands include strong regional snacking brands, such as Golden Flake ® Chips and Cheese, Snyder of Berlin ®, and R.W.

and BFY brands such as Good Health®, as well as other partner and private label brands.

On February 5, 2024, the Company sold the Good Health and R.W.

Garcia brands the to affiliates of Our Home™.

For the fiscal year ended December 31, 2023, Power brand invoiced sales increased by approximately 8.6%, while Foundation brand invoiced sales decreased approximately 5.4% from fiscal year 2022.

The increase in Power brand invoiced sales was due primarily to favorable pricing actions and increased volumes, partially offset by the impact of continued IO conversions.

Foundation brand invoiced sales decrease was primarily driven by volume decline and the impact of continued IO conversion, offset by certain pricing initiatives.

The Company's volume for the fiscal year ended December 31, 2023 was impacted by significant SKU rationalization focused on a reduction in private label, co-manufactured and partner branded products, which fall in Foundation Brands, as well as by weight outs and changes to price pack architecture.

Net income (loss) attributable to controlling interest

$ 15,974 $ (24,937)

Fiscal Year Ended December 29, 2024 versus Fiscal Year Ended December 31, 2023

Net sales were $1,409.3 million for the fiscal year ended December 29, 2024 and $1,438.2 million for the fiscal year ended December 31, 2023.

Net sales for the fiscal year ended December 29, 2024 decreased $28.9 million or 2.0% from fiscal year 2023.

The Good Health and R.W.

Garcia Sale contributed 3.3% to the year-over-year decrease.

The remaining change, totaling a 1.3% increase in net sales, was related to favorable volume/mix of 1.5% as further discussed below, offset by 0.2% attributable to lower net price realization as a result of the promotional environment and a decrease of 0.1% related to IO conversions.

IO discounts increased from $179.3 million for the fiscal year ended December 31, 2023 to $183.6 million for the fiscal year ended December 29, 2024.

Sales are evaluated based on classification as Branded Salty Snacks or Non-Branded & Non-Salty Snacks.

For the fiscal year ended December 29, 2024, excluding prior year sales related to the Good Health and R.W.

Garcia Sale and certain IO conversions, Branded Salty Snacks and Non-Branded & Non-Salty Snacks totaled 87% and 13% of our net sales, respectively.

For the fiscal year ended December 29, 2024, excluding prior year sales related to the Good Health and R.W.

Garcia Sale and certain IO conversions, Branded Salty Snacks and Non-Branded & Non-Salty Snacks net sales increased by 3.7% and decreased by 12.3%, respectively.

Cost of goods sold and Gross profit

Gross profit was $456.5 million for the fiscal year ended December 31, 2023 and $449.1 million for the fiscal year ended January 1, 2023.

Gross profit for the fiscal year ended December 31, 2023 increased $7.4 million or 1.7% over the comparable period in fiscal year 2022.

The increase in gross profit for the fiscal year ended December 31, 2023 was driven by productivity and pricing initiatives which were put in place to help reduce the impact of inflation on commodity costs, and wages which hindered gross profit, partially offset by volume decline.

During the fiscal year ended January 1, 2023, gross profit was benefited by $6.0 million recorded as a reduction of cost of goods sold related to proceeds received from a settlement of business interruption insurance, which reimbursed certain expenses as we shifted production to other facilities, including co-manufacturers, due to a natural disaster that affected one of our smaller manufacturing facilities.

Our gross profit margin was 31.7% for the fiscal year ended December 31, 2023 versus 31.9% for the fiscal year ended January 1, 2023.

The decline in gross profit margin was primarily driven by commodity and wage inflation, transitory higher inbound freight costs, offset by the impact of productivity initiatives.

Additionally, IO discounts increased to $179.3 million for the fiscal year ended December 31, 2023 from $156.8 million for the fiscal year ended January 1, 2023.

IO conversions contributed to a gross profit decline of $9.2 million, or a gross profit margin impact of 0.7%, and the remaining IO discount growth was driven by pricing actions.

Gross profit was $494.8 million for the fiscal year ended December 29, 2024 and $456.5 million for the fiscal year ended December 31, 2023.

Our gross profit margin was 35.1% for the fiscal year ended December 29, 2024 versus 31.7% for the fiscal year ended December 31, 2023.

The increase in gross profit and gross profit margin was primarily driven by benefits from increased productivity including plant network optimization activities, favorable sales volume/mix and ingredient cost deflation which more than offset supply chain cost inflation, investments to support the Company’s productivity initiatives and slightly lower pricing.

Additionally, IO discounts increased to $183.6 million for the fiscal year ended December 29, 2024, from $179.3 million for the fiscal year ended December 31, 2023.

Selling, distribution and administrative expenses

Selling, distribution and administrative expenses were $433.1 million for the fiscal year ended December 31, 2023 and $444.4 million for the fiscal year ended January 1, 2023, a decrease of $11.3 million or 2.5%.

The decrease was primarily attributable to lower acquisition and integration costs due to $23.0 million in the prior year period related to the buyout of multiple distributors and reductions of selling costs related to the continued conversion out of Company owned RSP to IO routes, offset by impairments of $12.6 million primarily related to the closing of the Company's manufacturing facility in Birmingham, Alabama and $4.7 million related to a contract termination with a co-manufacturer which both occurred in the current year period, and rising labor and higher stock-based compensation costs.

Selling, distribution and administrative expenses were $435.8 million for the fiscal year ended December 29, 2024 and $433.1 million for the fiscal year ended December 31, 2023, an increase of $2.7 million or 0.6%.

The increase in selling, distribution, and administrative expense was primarily attributable to increased marketing spend on our Branded Salty Snacks as well as investments in digital and social consumer marketing, higher delivery costs due to outsourcing our private fleet operation, and investments in selling capabilities to support distribution growth in Expansion geographies partially offset by $12.6 million related to the impairment of fixed assets, primarily related to the closure of the manufacturing operation at the Birmingham, Alabama facility during the fiscal year ended December 31, 2023 as discussed in Note 4.

Property, Plant and Equipment, Net to our Audited Financial Statements.

The Company also recognized a liability and related expense of $4.7 million related to a contract termination with a co-manufacturer, which is recorded in the administrative line in the Consolidated Statement of Operations and Comprehensive Income (Loss) during the fiscal year ended December 31, 2023.

This agreement was a continuation of the Company's response to shifting production from a manufacturing facility that was damaged by a natural disaster in 2021.

This decrease was partially offset by an increased marketing spend, higher distribution costs, and investments in selling capabilities to support distribution growth in Expansion geographies.

(Loss) Gain on sale of assets

(Loss) gain on sale of assets was $(7.4) million for the fiscal year ended December 31, 2023 and $0.7 million for the fiscal year ended January 1, 2023.

The Company has continued to convert company-owned routes to IO routes during the fiscal year ended December 31, 2023, which was substantially complete as of December 31, 2023, offsetting the sales price by the respective route intangible asset.

Loss on sale of assets was $0.1 million for the fiscal year ended December 29, 2024 and $7.4 million for the fiscal year ended December 31, 2023.

The loss during the fiscal year ended December 31, 2023 was primarily related to the sale of the Company's manufacturing facility in Bluffton, Indiana which generated a loss of $13.4 million, partially offset by gain on sale of land for $4.0 million and the sale of IO routes and other fixed assets.

Other expense, net

Other expense, net was $55.3 million for the fiscal year ended December 31, 2023 and $43.3 million for the fiscal year ended January 1, 2023.

The increase in expense was driven by interest expense of $60.6 million for the fiscal year ended December 31, 2023 compared to $44.4 million for the fiscal year ended January 1, 2023.

The increase in interest expense is primarily attributable to higher interest rates, which impacted the portion of debt that the Company has not hedged.

Income taxes were an expense of $0.8 million for the fiscal year ended December 31, 2023 and a benefit of $23.9 million for the fiscal year ended January 1, 2023.

The income tax benefit recognized for the fiscal year ended January 1, 2023 is largely driven by the removal of a portion of a valuation allowance, which partially offsets a deferred tax asset, which resulted in a $17.2 million income tax benefit.

Please see Note 15.

"Income Taxes" of our Audited Financial Statements for addition information.

Other income (expense), net

Other income (expense), net was $10.6 million for the fiscal year ended December 29, 2024 and $(55.3) million for the fiscal year ended December 31, 2023.

The increase in other income of $65.8 million for the fiscal year ended December 29, 2024 compared to the fiscal year ended December 31, 2023 was primarily due to the gain on sale of business of $44.0 million relating to the Good Health and R.W.

Garcia Sale which occurred on February 5, 2024.

Divestitures to our Audited Financial Statements, for further discussion.

Interest expense also decreased by $15.7 million, primarily related to the $141.0 million payment on our Term Loan B and the $17.7 million payment on our Real Estate Term Loan during the fiscal year ended December 29, 2024.

There was also an increase in the loss on the remeasurement of the warrant liability of $8.0 million and a loss on debt extinguishment of $1.3 million recognized during the fiscal year ended December 29, 2024.

Long-Term Debt to our Audited Financial Statements, for further discussion.

Income taxes expense was $38.7 million for the fiscal year ended December 29, 2024 and $0.8 million for the fiscal year ended December 31, 2023.

The increase in income tax expense for the fiscal year ended December 29, 2024 compared to the fiscal year ended December 31, 2023 is primarily attributable to the Good Health and R.W.

Garcia Sale, which occurred on February 5, 2024.

Divestitures to our Audited Financial Statements, for further discussion.

The income tax expense increase is also driven by the increase in valuation allowance, which partially offsets a deferred tax asset, which resulted in a $7.6 million income tax expense.

Income Taxes , for further discussion.

Non-GAAP Financial Measures

We use non-GAAP financial information and believe it is useful to investors as it provides additional information to facilitate comparisons of historical operating results, identify trends in our underlying operating results and provides additional insight and transparency on how we evaluate the business.

We use non-GAAP financial information and believe it is useful to investors as it provides additional information to facilitate comparisons of historical operating results and identify trends in our underlying operating results, and it also provides additional insight and transparency on how we evaluate the business.

We use non-GAAP financial measures to budget, make operating and strategic decisions, and evaluate our performance.

We have detailed the non-GAAP adjustments that we make in our non-GAAP definitions below.

The adjustments generally fall within the categories of non-cash items, acquisition and integration costs, business transformation initiatives, and financing-related costs.

The adjustments generally fall within the categories of non-cash items, acquisition, divestiture and integration costs and gains, business transformation initiatives, and financing-related costs.

We believe the non-GAAP measures should always be considered along with the related U.S.

generally accepted accounting principles ("U.S.

GAAP") financial measures.

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We define EBITDA as net income before interest, income taxes, and depreciation and amortization.

We define Adjusted EBITDA as EBITDA further adjusted to exclude certain non-cash items, such as accruals for long-term incentive programs;

hedging and purchase commitments adjustments;

remeasurement of warrant liabilities and asset impairments;

acquisition and integration costs;

We define Adjusted EBITDA as EBITDA further adjusted to exclude certain non-cash items, such as accruals for long-term incentive programs and asset impairments and hedging and purchase commitments adjustments;

remeasurement of warrant liabilities;

acquisition, divestiture and integration costs and gains;

business transformation initiatives;

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

We believe EBITDA and Adjusted EBITDA are useful to investors in the evaluation of Utz’s operating performance compared to other companies in the salty snack industry, as similar measures are commonly used by companies in this industry, however we caution that other companies may use different definitions from us and such figures may not be directly comparable to our figures.

however, we caution that other companies may use different definitions from us and such figures may not be directly comparable to our figures.

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

The following table provides a reconciliation from Net Income (Loss) to EBITDA and Adjusted EBITDA for the fiscal year ended December 31, 2023 and the fiscal year ended January 1, 2023:

(dollars in millions) For the Fiscal Year Ended December 31, 2023 For the Fiscal Year Ended January 1, 2023

The following table provides a reconciliation from Net Income (Loss) to EBITDA and Adjusted EBITDA for the fiscal year ended December 29, 2024 and the fiscal year ended December 31, 2023:

(dollars in millions) For the Fiscal Year Ended December 29, 2024 For the Fiscal Year Ended December 31, 2023

Net income (loss)

$ 30.7 $ (40.0)

Net Income as a % of Net Sales

2.2 % (2.8) %

Plus non-GAAP adjustments:

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Certain Non-Cash Adjustments (2)

Acquisition and Integration (3)

Acquisition, Divestiture and Integration (3)

Business Transformation Initiatives (4)

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

Incentive programs – The Company incurred $15.5 million and $8.8 million of share-based compensation that was awarded to associates and directors for the fiscal year ended December 31, 2023 and the fiscal year ended January 1, 2023, respectively.

Asset Impairments and Write-Offs — For the fiscal year ended December 31, 2023, the Company recorded an adjustment for a non-cash loss on sale of $13.7 million related to fixed assets for the sale of the Bluffton, Indiana plant, along with $4.7 million related to the termination of the contract that was settled with the sale, and impairments of $12.6 million related to the closure of the Company's manufacturing facility in Birmingham, Alabama and Gramercy, Louisiana.

For the fiscal year ended January 1, 2023, the Company recorded an adjustment for an impairment of $2.0 million related to the termination of distribution agreements.

Incentive programs – The Company incurred $17.6 million and $15.5 million of share-based compensation, which was awarded to associates and directors, and compensation expense associated with the 2020 Omnibus Equity Incentive Plan (the “OEIP”) for the fiscal year ended December 29, 2024 and the fiscal year ended December 31, 2023, respectively.

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

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

The adjustment related to Purchase Commitment and Other non-cash adjustments were $3.0 million and $0.5 million for the fiscal year ended December 31, 2023 and the fiscal year ended January 1, 2023, respectively.

In addition, for the fiscal year ended December 31, 2023, we recorded $1.2 million for the amortization of cloud based computing assets.

(3) Adjustment for Acquisition and Integration Costs – This is comprised of consulting, transaction services, and legal fees incurred for acquisitions and certain potential acquisitions, in addition to expenses associated with integrating recent acquisitions.

Such expenses were $9.7 million for the fiscal year ended December 31, 2023, as well as $1.1 million of income for the change of liability associated with the Tax Receivable Agreement for the fiscal year ended December 31, 2023.

In fiscal year 2022, the majority of charges are related to the buyout of multiple distributors, which were accounted for as contract terminations resulting in expense of $23.0 million as well as other integration costs.

During the fiscal year ended January 1, 2023, we incurred incremental costs of $21.8 million, for the integration of Truco Holdco Inc., R.W.

Garcia Co., Inc., Kings Mountain, distributor buyouts, and costs to evaluate other potential acquisitions, as well as $1.0 million for the incremental liability associated with the Tax Receivable Agreement included in the fiscal year ended January 1, 2023.

The adjustment related to purchase commitment and other adjustments, including cloud computing, were $4.3 million and $4.2 million for the fiscal year ended December 29, 2024 and the fiscal year ended December 31, 2023, respectively.

(3) Adjustment for Acquisition, Divestiture and Integration Costs – This is comprised of consulting, transaction services, and legal fees incurred for acquisitions and certain potential acquisitions, in addition to expenses associated with integrating recent acquisitions.

Such expenses were $20.9 million for fiscal year ended December 29, 2024.

Such expenses were $9.7 million for the fiscal year ended December 31, 2023, as well as $1.1 million of income for the change of liability associated with the TRA for the fiscal year ended December 31, 2023.

Also included for the fiscal year ended December 29, 2024 was a gain of $44.0 million related to the Good Health and R.W.

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

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

The Company incurred such costs of $31.0 million for the fiscal year ended December 31, 2023 and $22.1 million for the fiscal year ended January 1, 2023, which included the closure of our Gramercy, Louisiana and Birmingham, Alabama plants along with various other supply chain, commercial and administrative initiatives.

During fiscal year 2023, we completed the closure of our Gramercy, Louisiana and Birmingham, Alabama manufacturing plants along with the sale of our Bluffton, Indiana manufacturing plant.

The Company incurred such costs of $28.1 million for the fiscal year ended December 29, 2024 and $31.0 million for the fiscal year ended December 31, 2023.

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

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Sources and Uses of Cash

We believe that the cash provided by operating activities, our revolving credit facility, our term loans, and derivative financial instruments will continue to provide sufficient liquidity for our working capital needs, planned capital expenditures and future payments of our contractual, and tax obligations.

We continually evaluate our financing strategy to meet our short- and longer-term capital needs.

We believe that the cash provided by our operating activities, revolving credit facility, term loans, and derivative financial instruments will continue to provide sufficient liquidity for our working capital needs, planned capital expenditures and future payments of our contractual, and tax obligations both in the short term and long term.

We regularly evaluate our financing strategy to meet our short- and longer-term capital needs.

From time-to-time, we may dispose of assets or enter into other cash generating transactions, such as through a sale-leaseback, when we deem beneficial.

To date, we have been successful in generating cash and raising financing as needed.

However, if a serious economic or credit market crisis ensues or other adverse developments arise, it could have a material adverse effect on our liquidity, results of operations and financial condition.

On July 20, 2023, the asset based revolving credit facility (as amended, the "ABL facility") with an initial aggregate principal amount of $100.0 million was 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 $795.0 million in aggregate principal of Term Loan B (as amended, "Term Loan B").

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

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

However, if a serious economic or credit market crisis ensues or another adverse development arises, it could have a material adverse effect on our liquidity, results of operations and financial condition.

Financing Arrangements

The primary objective of our financing strategy is to maintain a prudent capital structure that provides us flexibility to pursue our growth objectives.

We use short-term debt as management determines is reasonable, principally to finance ongoing operations, including our seasonal requirements for working capital (generally accounts receivable, inventory, and prepaid expenses and other current assets, less accounts payable, accrued payroll, and other accrued liabilities), and a combination of equity and long-term debt to finance both our base working capital needs and our non-current assets.

Term Debt and Revolving Credit Facility

On April 17, 2024, the Company amended its Term Loan B to refinance in full all of the $630.3 million outstanding in term loans and reduce the interest rate from SOFR plus the applicable rate of 3.00% plus a credit spread adjustment to SOFR plus the applicable rate of 2.75%, as well as make certain other changes.

Other material terms of the Term Loan B, including the January 2028 maturity date, remain unchanged.

The Company recorded a loss on debt extinguishment of $1.3 million related to the refinancing of its Term Loan B in its Consolidated Statement of Operations and Comprehensive Income (Loss) for the fiscal year ended December 29, 2024.

Subsequently, on January 29, 2025, the Company amended its Term Loan B to refinance in full all of the $630.3 million outstanding term loan, reduce the interest rate from SOFR plus the applicable rate of 2.75% to SOFR plus the applicable rate of 2.50% and extend the maturity date from January 20, 2028 to January 29, 2032, as well as make certain other changes.

Other material terms of the Term Loan B remained unchanged.

Revolving Credit Facility

On April 17, 2024, the Company also amended its asset-based revolving credit facility (“ABL facility”) to reduce the rate from SOFR plus the applicable rate ranging from 1.50%-2.00% plus a credit spread adjustment to SOFR plus the applicable rate ranging from 1.50%-2.00%, as well as make certain other changes.

Other material terms of the ABL facility, including maturity date, remained unchanged.

As of December 29, 2024 and December 31, 2023, $0.2 million and $0.4 million, respectively, was outstanding under the ABL 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 December 31, 2023 and January 1, 2023, $158.4 million and $163.0 million, respectively, was available for borrowing, net of letters of credit.

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.

As of December 29, 2024 and December 31, 2023, $158.7 million and $158.4 million, respectively, was available for borrowing, net of letters of credit.

Standby letters of credit in the amount of $10.3 million and $12.2 million were issued as of December 29, 2024 and December 31, 2023, respectively.

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

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Our expected future payments at December 29, 2024 primarily consist of:

• Short-term cash requirements related primarily to funding operations (including expenditures for raw materials, labor, manufacturing and distribution, trade and promotions, advertising and marketing, benefit plan obligations and lease expenses) as well as periodic expenditures for acquisitions, shareholder returns (such as dividend payments), property, plant and equipment and any significant one-time non-operating items.

• Cash requirements related to Other Notes Payable and Capital Leases (Refer to Note 8.

Long-Term Debt to our Audited Financial Statements).

• Long-term cash requirements primarily relate to funding long-term debt repayments and related interest payment on long-term debt (Refer to Note 8.

• Long-term cash requirements primarily related to funding long-term debt repayments and related interest payment on long-term debt (Refer to Note 8.

Long-Term Debt to our Audited Financial Statements).

• Long-term cash requirements related to our deferred taxes (Refer to Note 15.

• Long-term cash requirements related to our deferred taxes and TRA (Refer to Note 14.

Income Taxes to our Audited Financial Statements).

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IO Guarantees Off Balance Sheet

The Company partially guarantees loans made to IOs by Cadence Bank, Bank of America and M&T Bank for the purchase of routes, all of which was recorded by the Company as off-balance sheet arrangements.

The Company partially guarantees loans made to IOs by Bank of America and two other banks for the purchase of routes, all of which was recorded by the Company as off-balance sheet arrangements.

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

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Contingencies to our Audited Financial Statements.

The following table presents net cash provided by operating activities, investing activities, and financing activities for the fiscal year ended December 31, 2023, and fiscal year ended January 1, 2023:

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

The following table presents net cash provided by operating activities, investing activities, and financing activities for the fiscal year ended December 29, 2024, and fiscal year ended December 31, 2023:

(in thousands) For the Fiscal Year Ended December 29, 2024 For the Fiscal Year Ended December 31, 2023

Net cash provided by operating activities $ 106,166 $ 76,640

Net cash used in investing activities (48,492) (76,067)

Net cash (used in) provided by financing activities

Net cash provided by (used in) investing activities 74,961 (48,492)

Net cash (used in) financing activities

(177,012) (49,055)

At December 31, 2023, our consolidated cash balance, including cash equivalents, was $52.0 million or $20.9 million lower than at January 1, 2023.

Net cash provided by operating activities for the fiscal year ended December 31, 2023 was $76.6 million an increase of $28.4 million from the fiscal year ended January 1, 2023.

The increase is largely driven by a decrease in inventory levels, an increase in cash net income, and faster cash collections on accounts receivable, partially offset by a decreases in accounts payable and accrued expenses related to more favorable supplier terms as well as timing.

Cash used in investing activities for the fiscal year ended December 31, 2023 was $48.5 million a decrease of $27.6 million from the fiscal year ended January 1, 2023.

The decrease is largely driven by the decrease in purchases of property and equipment of $32.2 million.

Fiscal year 2022 capital expenditures included $38.4 million related to a facilities purchase described further in Note 4.

and Equipment" to our Audited Financial Statements.

Net cash used in financing activities was $49.1 million for the fiscal year ended December 31, 2023 an increase of $108.0 million from the fiscal year ended January 1, 2023.

The decrease was primarily attributable to lower net cash borrowings of $83.3 million.

At December 29, 2024, our consolidated cash balance, including cash equivalents, was $56.1 million or $4.1 million higher than at December 31, 2023.

Net cash provided by operating activities for the fiscal year ended December 29, 2024 was $106.2 million an increase of $29.5 million from the fiscal year ended December 31, 2023.

The increase is largely driven by an increase in cash net income, partially offset by an increase in inventory levels.

The increase in prepaid expenses and other assets and the increase in accounts payable and accrued expenses and other includes approximately $30 million impact from the Good Health and R.W.

Garcia Sale and Manufacturing Facilities Sale and as well as non-cash impact from entering into an operating lease agreement related to a distribution center that was entered into during fiscal year 2024.

Leases to our Audited Financial Statements.

Cash used in investing activities for the fiscal year ended December 29, 2024 was $75.0 million an increase of $123.5 million from the fiscal year ended December 31, 2023.

The increase is primarily driven by proceeds from the sale of a business for $167.5 million, the Good Health and R.W.

Garcia Sale, proceeds from sale of property and equipment primarily related to the sale of the manufacturing facilities in Birmingham, Alabama, Berlin, Pennsylvania and Fitchburg, Massachusetts and the sale of routes to IOs.

These proceeds were partially offset by purchases of property and equipment, notes receivable and purchase of intangibles related to an indefinite life intangible right for the use of a third-party brand name.

This compares to the cash used in investing activity of $48.5 million for the fiscal year ended December 31, 2023 primarily driven by purchases of property and equipment.

Net cash used in financing activities was $177.0 million for fiscal year ended December 29, 2024, an increase of $128.0 million primarily driven by the pay down of debt utilizing the proceeds from the Good Health and R.W.

Garcia Sale partially and payment of dividends and distributions to noncontrolling interest.

Debt Covenants

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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 December 31, 2023.

UBH and its subsidiaries were in compliance with their financial covenants as of December 29, 2024.

Refer to Note 8.

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Application of Critical Accounting Policies and Estimates

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States.

Our consolidated financial statements have been prepared in accordance with U.S GAAP.

While the majority of our revenue, expenses, assets and liabilities are not based on estimates, there are certain accounting principles that require management to make estimates regarding matters that are uncertain and susceptible to change.

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If an entity believes, as a result of each qualitative assessment, it is more likely than not that goodwill or an indefinite-lived intangible asset is not impaired, a quantitative impairment test is not required.

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

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

For the qualitative impairment analysis performed, which took place on the first day of the fourth quarter, we have taken into consideration all the events and circumstances listed in FASB ASC 350, Intangibles—Goodwill and Other and concluded that Goodwill and our intangible assets were not impaired.

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

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The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income and the reversal of deferred tax liabilities during the period in which related temporary differences become deductible.

Under the terms of the TRA as part of the Business Combination Agreement, 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.

Under the terms of the TRA, the Company generally will be required to pay to Noncontrolling Interest Holders 85% of the applicable cash savings, if any, in U.S.

This is accounted for in conjunction with the methods used to record income tax described above.

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The benefit of tax positions taken or expected to be taken in our 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.

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

As of each of December 31, 2023, and January 1, 2023, no liability for unrecognized tax benefits was required to be reported.

As of each of December 29, 2024, and December 31, 2023, no liability for unrecognized tax benefits was required to be reported.

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

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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 7. Management’s Discussion and Analysis