Utz Brands, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following management's discussion and analysis of financial condition and results of operations ("MD&A") should be read in conjunction with our unaudited interim consolidated financial statements as of and for the thirteen weeks ended March 30, 2025, together with our audited consolidated financial statements for our most recently completed fiscal year set forth under Item 8 of our Annual Report on Form 10-K for the year ended December 29, 2024. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified above and those discussed in Item 1A "Risk Factors" of our Annual Report on Form 10-K for the year ended December 29, 2024 and other filings under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Our fiscal year end is the Sunday closest to December 31. Our fiscal year 2024 ended December 29, 2024 and was a fifty-two-week fiscal year. Our fiscal year 2025 will end on December 28, 2025 and will also be a fifty-two-week fiscal year. Our fiscal quarters are comprised of thirteen weeks each, except for fifty-three-week fiscal years for which the fourth quarter is comprised of fourteen weeks, and end on the thirteenth Sunday of each quarter (or the fourteenth Sunday of the fourth quarter in fifty-three-week fiscal years). Overview We were founded in 1921 in Hanover, Pennsylvania and benefit 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, pork skins, pub/party mixes and other snacks. 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 March 30, 2025, 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 2,400 direct-store delivery ("DSD") routes. We have historically expanded our geographic reach and product portfolio organically and through acquisitions. Based on 2024 retail sales, we are the second-largest producer of branded salty snacks in our collective core geographies of Alabama, Connecticut, Delaware, Louisiana, Maine, Maryland, Massachusetts, Mississippi, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Virginia, Vermont, West Virginia, and Washington (the “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 geographies in the United States other than our Core Geographies (the "Expansion Geographies") over the past seven consecutive quarters with retail volumes and retail sales being up by 8.9% and 4.9%, respectively, for the thirteen weeks ended March 30, 2025 versus the comparable prior year period. 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 the Expansion Geographies and untapped channels and customers by further expanding our Branded Salty Snacks, comprised of our Power Four Brands, consisting of our flagship Utz® brand, On the Border®, Zapp's®, and Boulder Canyon®, along with our other brands including Golden Flake®, TORTIYAHS!®, Hawaiian®, Bachman®, Tim's Cascade®, Dirty Potato Chips®, TGI Fridays®, and Vitner's®, in Expansion Geographies, as well as maintaining our share in our Core Geographies. Our Core Geographies retail volumes and retail sales were up 2.9% and down 3.7%, respectively, for the thirteen weeks ended March 30, 2025 versus the comparable prior year period. Long-Term Demographics, Consumer Trends, and Demand – We participate in the $42 billion U.S. salty snack category, within the broader approximately $143 billion market for U.S. snack foods as of March 30, 2025, based on Circana data. 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 2025 study from Circana cites that 48.8% of consumers snack three or more times a day, up 2.7 points versus 2024. 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 for salty snacks for the foreseeable future. 17 For the thirteen weeks ended March 30, 2025, U.S. retail sales for salty snacks based on Circana data decreased by 1.7% versus the comparable prior year period while Utz's retail sales were flat. Competition – The salty snack industry is highly competitive and includes many diverse participants. Our products primarily compete with other salty snacks but also compete more broadly for certain eating occasions with other snack foods. We believe that the principal competitive factors in the salty snack industry include taste, convenience, product variety, product quality, price, nutrition, consumer brand awareness, media and promotional activities, in-store merchandising execution, customer service, cost-efficient distribution, access to retailer shelf space. We believe we compete effectively with respect to each of these factors. We also source nearly all of our inputs domestically within the United States, therefore, we may be less impacted by international pricing volatility and tariffs as compared to other multi-national salty snack food companies. Additionally, beginning in 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. Operating Costs – Our operating costs include raw materials, labor, manufacturing overhead, selling, distribution, and administrative expenses. We manage these expenses through annual cost saving and productivity initiatives, sourcing and hedging programs, pricing actions, refinancing and tax optimization. Additionally, we maintain ongoing efforts led by our transformation office, to expand our profitability, including implementing significant reductions to our operating cost structure in both supply chain and overhead costs. Financing Costs and Exposure to Interest Rate Changes – As of March 30, 2025, we had $739.3 million in variable rate indebtedness, up from $690.1 million as of December 29, 2024. As of December 29, 2024, our variable rate indebtedness was benchmarked to the Term SOFR Screen Rate (“SOFR”). As of March 30, 2025, we have existing interest rate swaps totaling $580.2 million of debt. Our interest rate hedge strategy has limited some of our exposure to changes in interest rates. We regularly evaluate our variable and fixed-rate debt. As of March 30, 2025, our interest rate swaps were carried as an asset on our balance sheet totaling $17.9 million. 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 thirteen weeks ended March 30, 2025 was 4.9%, down from 6.6% during the thirteen weeks ended March 31, 2024. On January 29, 2025, the Company amended its Term Loan B to refinance in full all of the $630.3 million outstanding term loans thereunder, 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 to 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. Refer to Note 8. Term Debt, Revolving Credit Facility, and Other Notes Payable and Note 9. Derivative Financial Instruments, Purchase Commitments, Warrants and Fair Value to our Unaudited Consolidated Financial Statements for additional information on debt and derivative activity. The Company has experienced the effect of increased interest rates on the portion of its debt that is not hedged and a further increase in interest rates could negatively impact our net income. Recent Developments and Significant Items Affecting Comparability Acquisitions and Dispositions 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, and 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. See Note 2. Divestitures to our Unaudited Consolidated Financial Statements. On April 22, 2024, the Company also sold to Our Home its Berlin, PA and Fitchburg, MA manufacturing facilities and certain related assets, including certain inventory (the “Manufacturing Facilities Sale”). 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 services under these agreements, which the Company will recognize through income from operations over the terms of the transition services and co-manufacturing agreements. 18 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, recent focus has been on 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 Boulder Canyon® increases with the launching of new flavors that capitalized on the hot & spicy trend and by entrance into the cheese snack subcategory. Boulder Canyon® gained share for the thirteen weeks ended March 30, 2025 versus the comparable prior year period led by strong same store velocities with growth of 158.8% per Circana. In the natural channel, Boulder Canyon growth was 41.7% for the thirteen weeks ended March 23, 2025 per Spins. Within Delivering Craveable Flavor, recently, 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, we recently introduced a portfolio of variety/multipacks across our Power Four Brands, consisting of our flagship Utz® brand, On The Border®, Zapp’s ®, and Boulder Canyon®, and our Targeted Brands, consisting of Golden Flake®, TORTIYAHS!®, Hawaiian®, Bachman®, Tim's Cascade®, Dirty Potato Chips®, and TGI Fridays®. 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, inflationary conditions and the effects of governmental, agricultural or other programs, including tariffs or other trade policies, may affect the cost and availability of raw materials and agricultural materials used in our products. Given that nearly all our input costs are sourced domestically and our manufacturing facilities are all in the United States, we expect that recent tariff volatility will have a minor impact on our business in 2025. We address commodity costs primarily through the use of buying-forward, which locks in pricing for key materials between three and 18 months in advance. Other methods include hedging, net pricing adjustments to cover longer term cost inflation, and manufacturing and overhead cost control. Our hedging techniques, such as forward contracts, limit the impact of fluctuations in the cost of our principal raw materials; however, we may not be able to fully hedge against commodity cost changes, where there is a limited ability to hedge, and our hedging strategies may not protect us from increases in specific raw material costs. We experienced an increase in pricing in certain commodity trends that continued to rise throughout fiscal year 2022 and have since stabilized. Commodity cost increases in commodity trends may adversely impact our net income. Although we have experienced some ingredient cost deflation since 2022, we continue to experience rising costs related to fuel and freight rates as well as rising labor costs both of which have negatively impacted profitability. Transportation costs have been on the rise since early in 2021 and may continue to rise and 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 (See "Key Developments and Trends - Long-Term Demographics, Consumer Trends, and Demand"). 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. Market factors including supply and demand may result in higher costs of sourcing those materials. Independent Operator Conversions Our DSD distribution is executed via Company-owned routes operated by route sales professionals (“RSP”), and third-party routes managed by IOs. We have used the IO and RSP models for more than a decade. In fiscal year 2017, we embarked on a multi-year strategy to convert all company-owned RSP routes to the IO model. The conversion process involves selling distribution rights to a defined route to an IO. 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 Sheets, 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. 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 March 30, 2025, substantially all of our DSD routes are managed by IOs. 19 Results of Operations Overview The following tables present selected unaudited financial data for the thirteen weeks ended March 30, 2025 and March 31, 2024. (in thousands) Thirteen weeks ended March 30, 2025 Thirteen weeks ended March 31, 2024 Net sales $ 352,084 $ 346,523 Cost of goods sold 233,854 226,950 Gross profit 118,230 119,573 Selling, distribution, and administrative expenses Selling and distribution 77,265 73,666 Administrative 35,949 35,782 Total selling, distribution, and administrative expenses 113,214 109,448 Gain (loss) on sale of assets, net 660 (470) Income from operations 5,676 9,655 Other (expense) income Gain on sale of business — 44,015 Interest expense (11,470) (13,831) Loss on debt extinguishment (531) — Other income 362 910 Gain (loss) on remeasurement of warrant liability 11,016 (11,808) Other (expense) income, net (623) 19,286 Income before taxes 5,053 28,941 Income tax (benefit) expense (625) 26,544 Net income 5,678 2,397 Net loss (income) attributable to noncontrolling interest 1,824 (6,387) Net income (loss) attributable to controlling interest $ 7,502 $ (3,990) 20 Thirteen weeks ended March 30, 2025 versus Thirteen weeks ended March 31, 2024 Net sales Net sales were $352.1 million and $346.5 million for the thirteen weeks ended March 30, 2025 and March 31, 2024, respectively. Net sales for the thirteen weeks ended March 30, 2025 increased $5.6 million or 1.6% over the comparable period in 2024. The 1.6% increase in net sales was related to favorable volume/mix of 6.3% as further discussed below, offset by 3.4% attributable to lower net price realization and 1.3% related to the Good Health and R.W. Garcia Sale . IO discounts increased to $44.7 million for the thirteen weeks ended March 30, 2025, up from $44.4 million for the corresponding thirteen weeks ended March 31, 2024. Sales are evaluated based on classification as Branded Salty Snacks or Non-Branded & Non-Salty Snacks, consisting of partner brands, private label, co-manufacturing for which Utz is the manufacturer, Utz branded non-salty snacks such as On The Border® Dips and Salsas and sales not attributable to specific brands. For the thirteen weeks ended March 30, 2025, Branded Salty Snacks and Non-Branded & Non-Salty Snacks totaled 87% and 13% of our net sales, respectively. For the thirteen weeks ended March 30, 2025 versus the comparable prior year period, Branded Salty Snacks net sales increased by 4.9% and Non-Branded & Non-Salty Snacks net sales decreased by 16.0%, of which 7.2% of the decrease relates to the Good Health and R.W. Garcia Sale in Non-Branded & Non-Salty Snacks due to its disposition in the prior year. Cost of goods sold and Gross profit Gross profit was $118.2 million and $119.6 million for the thirteen weeks ended March 30, 2025 and March 31, 2024, respectively. Our gross profit margin was 33.6% for the thirteen weeks ended March 30, 2025 versus 34.5% for the thirteen weeks ended March 31, 2024. The decrease in gross profit and gross profit margin was primarily driven by promotional investments, and increased investments to support capacity expansions, distribution growth, and capabilities, partially offset by productivity benefits. Additionally, IO discounts increased to $44.7 million for the thirteen weeks ended March 30, 2025, up slightly from $44.4 million for the thirteen weeks ended March 31, 2024. Selling, distribution, and administrative expense Selling, distribution, and administrative expenses were $113.2 million and $109.4 million for the thirteen weeks ended March 30, 2025 and March 31, 2024, respectively, resulting in an increase of $3.8 million or 3.5% for the thirteen weeks ended March 30, 2025 versus the comparable prior year period. The increase in selling, distribution, and administrative expense is primarily due to higher people, selling, and delivery costs to support growth. Gain (loss) on sale of assets Gain (loss) on sale of assets was $0.7 million and $(0.5) million for the thirteen weeks ended March 30, 2025 and March 31, 2024, respectively. Other (expense) income, net Other (expense) income, net was $(0.6) million and $19.3 million for the thirteen weeks ended March 30, 2025 and March 31, 2024, respectively. The increase of $19.9 million in other expense for the thirteen weeks ended March 30, 2025 compared to the thirteen weeks ended March 31, 2024 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, the loss on debt extinguishment of $0.5 million recorded for the thirteen weeks ended March 30, 2025 and a decrease in other income of $0.5 million, offset by an increase in the gain on remeasurement of warrant liability of $22.8 million. and a decrease in interest expense of $2.4 million. Income taxes Income tax (benefit) expense was $(0.6) million and $26.5 million for the thirteen weeks ended March 30, 2025 and March 31, 2024, respectively. The decrease in income tax expense is primarily attributable to the Good Health and R.W. Garcia Sale, which occurred on February 5, 2024. See Note 2. Divestitures, for further discussion. 21 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 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, divestiture and integration costs and gains, business transformation initiatives, and financing-related costs. We believe the non-GAAP financial measures should always be considered along with the most directly comparable U.S. generally accepted accounting principles ("U.S. GAAP") financial measures. We have provided the reconciliations between the U.S. GAAP and non-GAAP financial measures below, and we also discuss our underlying U.S. GAAP results throughout this discussion and analysis of our financial condition and results of operations. Our primary non-GAAP financial measures are listed below and reflect how we evaluate our current and prior-year operating results. As new events or circumstances arise, these definitions could change. When the definitions change, we will provide the updated definitions and present the related non-GAAP historical results on a comparable basis. EBITDA and Adjusted EBITDA 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 and asset impairments and hedging and purchase commitments adjustments; remeasurement of warrant liabilities; acquisition, divestiture and integration costs and gains; business transformation initiatives; and financing-related costs. 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. 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 to EBITDA and Adjusted EBITDA for the thirteen weeks ended March 30, 2025 and March 31, 2024: (dollars in millions) Thirteen weeks ended March 30, 2025 Thirteen weeks ended March 31, 2024 Net income $ 5.7 $ 2.4 Plus non-GAAP adjustments: Income Tax Expense (0.6) 26.5 Depreciation and Amortization 18.7 18.3 Interest Expense, Net 11.5 13.8 Interest Income (IO loans) (1) (0.5) (0.8) EBITDA 34.8 60.2 Certain Non-Cash Adjustments (2) 5.7 4.0 Acquisitions, Divestitures and Investments (3) 7.4 (38.4) Business Transformation Initiatives (4) 7.4 5.8 Financing-Related Costs (5) 0.8 — (Gain) loss on Remeasurement of Warrant Liability (6) (11.0) 11.8 Adjusted EBITDA $ 45.1 $ 43.4 Net income as a % of Net Sales 1.6 % 0.7 % Adjusted EBITDA as a % of Net Sales 12.8 % 12.5 % 22 (1) Interest Income (IO loans) refers to interest income that we earn from IO notes receivable that has resulted from our initiatives to transition from RSP distribution to IO distribution (" Business Transformation Initiatives "). There is a notes payable recorded that mirrors most of the IO notes receivable, and the interest expense associated with the notes payable is part of the Interest Expense, Net adjustment. (2) Certain Non-Cash Adjustments are comprised primarily of the following: Incentive programs – The Company incurred 3.5 million and $3.9 million of share-based compensation expense for awards to employees and directors, and compensation expense associated with the Omnibus Equity Incentive Plan (the "OEIP") for the thirteen weeks ended March 30, 2025 and March 31, 2024, 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 commitments and other adjustments, including cloud computing amortization, was expense of $2.2 million and $0.1 million for the thirteen weeks ended March 30, 2025 and March 31, 2024, respectively. (3) Adjustment for Acquisitions, Divestitures and Investments Costs and (Gains) – 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 $7.4 million and $5.6 million for the thirteen weeks ended March 30, 2025 and March 31, 2024, respectively. Also included for the thirteen weeks ended March 31, 2024 was a gain of $44.0 million related to the Good Health and R.W. Garcia Sale. (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 enterprise resource planning system transition costs fall into this category. The Company incurred such costs of $7.4 million and $5.8 million for the thirteen weeks ended March 30, 2025 and March 31, 2024, respectively. (5) Financing-Related Costs – These costs include adjustments for various items related to raising debt and equity capital or debt extinguishment costs. (6) Gains and Losses on Remeasurement of Warrant Liabilities - These liabilities are not expected to be settled in cash, and when exercised would result in a cash inflow to the Company with the warrants converting to Class A Common Stock with the liability being extinguished and the fair value of the warrants at the time of exercise being recorded as an increase to equity. Liquidity and Capital Resources Sources and Uses of Cash 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 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. 23 Term Debt and Revolving Credit Facility On January 29, 2025, the Company amended its Term Loan B to refinance in full all of the $630.3 million outstanding term loans thereunder, 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 to make certain other changes. Other material terms of the Term Loan B remain unchanged. The Company recorded a loss on debt extinguishment of $0.5 million related to the refinancing of its Term Loan B in its Consolidated Statements of Operations and Comprehensive Income (Loss) for the thirteen weeks ended March 30, 2025. ABL Facility As of March 30, 2025 and December 29, 2024, $50.0 million and $0.2 million, respectively, was outstanding under the asset based lending ("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 March 30, 2025 and December 29, 2024, $109.5 million and $158.7 million, respectively, was available for borrowing under the ABL facility, net of letters of credit. Standby letters of credit in the amount of $10.3 million have been issued as of both of March 30, 2025 and December 29, 2024. The standby letters of credit are primarily issued for insurance purposes. Refer to Note 8. Term Debt, Revolving Credit Facility, and Other Notes Payable, for more information. Cash Requirements Our expected future payments at March 30, 2025 primarily consisted 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, stockholder returns (such as dividend payments), property, plant and equipment and any significant non-operating items; • Cash requirements related to other notes payable and finance leases (Refer to Note 8. Term Debt, Revolving Credit Facility, and Other Notes Payable ); • Long-term cash requirements primarily related to funding long-term debt repayments and related interest payments on long-term debt (Refer to Note 8. Term Debt, Revolving Credit Facility, and Other Notes Payable ); • Long-term cash requirements related to our deferred taxes and Tax Receivable Agreement; and • Operating lease liabilities. Off-Balance Sheet Arrangements Purchase Commitments The Company has outstanding purchase commitments for specific quantities at fixed prices for certain key ingredients to economically hedge commodity input prices. Refer to Note 9. Derivative Financial Instruments, Purchase Commitments, Warrants and Fair Value. IO Guarantees Off Balance Sheet The Company partially guarantees loans made to IOs by Bank of America and two other banks for the purchase of routes, some of which were recorded as off-balance sheet arrangements. These loans are collateralized by the routes for which the loans are made. Accordingly, the Company has the ability to recover substantially all of the outstanding loan value upon default. Refer to Note 10. Contingencies . Cash Flow The following table presents net cash provided by or used in operating activities, investing activities and financing activities for the thirteen weeks ended March 30, 2025 and March 31, 2024. 24 (in thousands) Thirteen weeks ended March 30, 2025 Thirteen weeks ended March 31, 2024 Net cash used in operating activities $ (20,218) $ (9,065) Net cash (used in) provided by investing activities $ (40,734) $ 158,011 Net cash provided by (used in) financing activities $ 67,562 $ (153,965) Net cash used in operating activities for the thirteen weeks ended March 30, 2025 was $20.2 million compared to $9.1 million for the thirteen weeks ended March 31, 2024, with the difference largely driven by timing related decreases in accounts payable and accrued expenses and other of $21.2 million and increases in accounts receivable of $6.6 million, partially offset by increase in cash net income of $17.2 million. Cash used in investing activities for the thirteen weeks ended March 30, 2025 was $40.7 million, primarily driven by purchases of property and equipment. This compares to the cash provided by investing activity of $158.0 million for the thirteen weeks ended March 31, 2024 primarily driven by proceeds from sale of business of $167.5 million partially offset by purchases of property and equipment. Net cash provided by financing activities was $67.6 million for the thirteen weeks ended March 30, 2025, primarily driven by net borrowings on line of credit, term debt and notes payable of $80.4 million, partially offset by the payment of dividends and distributions to noncontrolling interest, payments of employee stock awards tax withholdings and debt issuance costs. This compares to net cash used in financing activities of $154.0 million for the thirteen weeks ended March 31, 2024, which was primarily related to the pay down of debt utilizing the proceeds from the Good Health and R.W. Garcia Sale. Debt Covenants 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 Company's real estate term loan, including equity interests in certain of UBH’s subsidiaries. The credit agreements contain certain affirmative and negative covenants relating to the operations and financial condition of UBH and its subsidiaries. UBH and its subsidiaries were in compliance with their financial and other covenants under the credit agreements as of March 30, 2025. New Accounting Pronouncements See Note 1. Operations and Summary of Significant Accounting Policies, to the unaudited consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q. Application of Critical Accounting Policies and Estimates There were no changes to critical accounting policies and estimates from those disclosed in Critical Accounting Policies and Estimates under Part II. Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 29, 2024 filed on February 20, 2025.