Utz Brands, Inc. (NYSE: UTZ) (“Utz” or the “Company”), a leading
U.S. manufacturer of branded salty snacks, today reported financial
results for the Company’s third fiscal quarter ended October 1,
2023.
3Q’23 Summary:
- Net sales increased 2.5% year-over-year to $371.9 million
- Organic Net Sales increased 3.1% year-over-year
- Net income of $16.2 million vs. net income of $1.5 million in
the year-ago period
- Adjusted EBITDA increased 9.2% year-over-year to $52.1
million
“We delivered solid results on both the top and bottom line in
the third quarter, with strong growth of our Power Brands,
particularly in our Expansion geographies. While Salty Snack
category growth continues to normalize after several years of
pricing actions, we also have seen some channel shifting due to a
more value-conscious consumer. We will remain agile in this dynamic
environment,” said Howard Friedman, Chief Executive Officer of
Utz.
Friedman continued, “During the quarter we took aggressive
actions to optimize our supply chain and portfolio for the future.
These actions negatively impacted our second half volume greater
than we anticipated, and coupled with the external environment,
resulted in a near-term impact to our full-year net sales guidance.
However, this stepped-up pace of supply chain and portfolio
optimization has already delivered increased productivity and other
costs savings, which has enabled us to maintain our full-year
Adjusted EBITDA guidance. I believe we have now laid a strong
foundation that well positions the Company for fiscal 2024 and
beyond. We look forward to sharing more details on our accelerated
value creation plans at our Investor Day in December.”
Third Quarter 2023 Financial
Highlights
13-Weeks Ended
(in $millions, except per share
amounts)
October 1, 2023
October 2, 2022
% Change
Net Sales
$
371.9
$
362.8
2.5
%
Organic Net Sales
374.2
362.8
3.1
%
Gross Profit
119.3
118.3
0.8
%
Gross Profit Margin
32.1
%
32.6
%
(52) bps
Adjusted Gross Profit
135.1
132.6
1.9
%
Adjusted Gross Profit Margin
36.3
%
36.5
%
(22) bps
Net Income
16.2
1.5
nm
Net Income Margin
4.4
%
0.4
%
nm
Adjusted Net Income
24.6
22.5
9.5
%
Adjusted EBITDA
52.1
47.7
9.2
%
Adjusted EBITDA Margin
14.0
%
13.1
%
86 bps
Basic (Loss) Earnings Per Share(1)
$
0.20
$
(0.01
)
nm
Adjusted Earnings Per Diluted Share(1)
$
0.17
$
0.16
9.2
%
(1)
On an As-Converted Basis
See the description of the Non-GAAP financial measures used in
this press release and reconciliations of such Non-GAAP measures to
the most comparable GAAP measures in the tables that accompany this
press release.
Third Quarter 2023 Results
Net sales in the quarter increased 2.5% to $371.9 million
compared to $362.8 million in the third quarter of 2022. The
increase in net sales was driven by Organic Net Sales growth of
3.1%, and this was partially offset by the Company’s continued
shift to independent operators (“IOs”) and the resulting increase
in sales discounts which the Company estimates impacted net sales
growth by (0.6%).
Organic Net Sales growth was driven by the flow through of
pricing actions that were taken in fiscal 2022 in response to
inflationary pressures, which accounted for a 3.7% increase in net
sales, partially offset by volume/mix declines of (0.6%). The
volume performance in the quarter was driven by strong growth of
the Company’s Power Brands while also benefiting from earlier than
planned holiday shipments. In addition, volume performance was
adversely impacted by supply chain transitions related to the
Company’s network optimization initiatives, and its ongoing SKU
rationalization program focused on reductions in private label and
partner brands. The Company estimates this SKU rationalization
program impacted volumes in the third quarter of 2023 by
approximately (3.3%). Excluding the impact from SKU
rationalization, the Company estimates that volume/mix would have
increased 2.7% in the third quarter of 2023 versus the prior year
period.
For the 13-week period ended October 1, 2023, the Company’s
retail sales, as measured by Circana (formerly IRI) MULO-C,
increased 3.2% versus the prior-year period and the Company’s Power
Brands’ retail sales increased 5.1% versus the prior-year
period(1). Power Brands’ retail sales growth versus the prior-year
period was led by Utz®, On The Border®, Zapp’s®, and Boulder
Canyon®. The Company’s Foundation Brands’ retail sales decreased
(9.1%)(2) versus the prior year period.
(1)
Circana (formerly IRI) Total US MULO-C,
custom Utz Brands hierarchy, on a pro forma basis.
(2)
Circana does not include certain Partner
Brands and Private Label sales that are not assigned to Utz
Brands.
Gross profit margin was 32.1% compared to 32.6% in the prior
year period. Adjusted Gross Margin was 36.3% compared to 36.5% in
the prior year period. The benefits from net price realization,
productivity, and favorable sales mix more than offset cost
inflation and supply chain investments, however the continued shift
to IOs impacted Adjusted Gross Margins as expected by approximately
60 basis points, but with offsetting benefits in Selling,
Distribution, and Administrative (“SD&A”) expense.
SD&A expenses increased 3.0% compared to the prior-year
period. Adjusted SD&A Expense decreased (1.8)% compared to the
prior year period primarily due to a reduction in selling costs
from the shift to IO’s, lower administrative expenses, and
productivity benefits. These factors were partially offset by
continued investments in brand marketing, selling infrastructure
and people, systems, and supply chain capabilities to support
growth.
The Company reported net income of $16.2 million compared to net
income of $1.5 million in the prior-year period. The increase in
net income compared to the prior year was primarily due to a $16.0
million gain from the remeasurement of private placement warrant
liability in the third quarter of 2023 versus a loss of $3.7
million in the prior year period. Partially offsetting this
improvement was interest expense of $15.5 million in the current
period compared to $11.6 million in the prior year period. The
increase in interest expense is primarily attributable to higher
interest rates, which impacted the portion of the Company’s
floating rate debt, and the Company’s Real Estate Term Loan issued
in October 2022.
Adjusted Net Income in the quarter increased 9.5% to $24.6
million compared to $22.5 million in the third quarter of 2022.
Adjusted Earnings per Share increased 9.2% to $0.17 compared to
$0.16 in the prior year period. Adjusted EBITDA increased 9.2% to
$52.1 million, or 14.0% as a percentage of net sales, compared to
Adjusted EBITDA of $47.7 million, or 13.1% as a percentage of net
sales, in the prior year period.
Balance Sheet and Cash Flow Highlights
- As of October 1, 2023
- Total liquidity of approximately $209.4 million, consisting of
cash on hand of $60.1 million and $149.3 million available under
the Company’s revolving credit facility.
- Net debt of $875.9 million resulting in a Net Leverage Ratio of
4.8x based on trailing twelve months Normalized Adjusted EBITDA of
$181.8 million.
- For the 39-weeks ended October 1, 2023
- Cash flow from operations was $49.1 million, which reflects
strong working capital performance in the third quarter. This
resulted in fiscal third quarter 2023 cash flow generation of $53.4
million vs $34.4 million in the prior year period.
- Capital expenditures were $45.7 million, and dividend and
distributions paid were $24.1 million.
Fiscal Year 2023 Outlook
The Company is today updating its previously-issued full-year
fiscal 2023 financial outlook.
- The Company now expects total net sales growth of 2% to 3%
(previously 3% to 5%) and Organic Net Sales growth of 3% to 4%
(previously 4% to 6%), with the Company’s continued shift to
IOs expected to impact total net sales growth by approximately
(-1.0%). The revised range reflects the impact of our aggressive
supply chain optimization actions and normalizing Salty Snack
category growth with some channel shifting by consumers. Net sales
growth is expected to be driven by net price realization, increased
marketing and innovation, and continued distribution gains of the
Company’s Power Brands, partially offset by the estimated impact of
approximately (-3%) from the Company’s SKU rationalization program.
Based on these assumptions, the Company now expects volume / mix to
be modestly lower than fiscal 2022.
- The Company continues to expect Adjusted EBITDA growth of 8%
to 11% driven by stronger operating performance led by the
Company’s productivity programs, with continued investments in
brand marketing, people, capabilities, and selling
infrastructure.
The Company also expects:
- An effective tax rate (normalized GAAP basis tax expense, which
excludes one-time items) in the range of 17% to 18% (previously 20%
to 22%);
- Interest expense of approximately $55 million;
- Capital expenditures in the range of $50 to $55 million;
and
- Net Leverage Ratio below 4.5x at year-end fiscal 2023.
With respect to projected fiscal 2023 Adjusted EBITDA, a
quantitative reconciliation is not available without unreasonable
efforts due to the high variability, complexity, and low visibility
with respect to certain items which are excluded from Adjusted
EBITDA. We expect the variability of these items to have a
potentially unpredictable, and potentially significant, impact on
our future financial results.
Conference Call and Webcast Presentation
The Company will host a conference call to discuss these results
today at 8:30 a.m. Eastern Time. Please visit the “Events &
Presentations” section of Utz’s Investor Relations website at
https://investors.utzsnacks.com to access the live listen-only
webcast and presentation. Participants can also dial in over the
phone by calling 1 (888) 510-2008. The Event Plus passcode is
1774171. The Company has also posted presentation slides and
additional supplemental financial information, which are available
now on Utz’s Investor Relations website.
A replay will be archived online and is also available
telephonically approximately two hours after the call concludes
through Thursday, November 16, 2023, by dialing 1-800-770-2030, and
entering the Event Plus passcode 1774171.
About Utz Brands, Inc.
Utz Brands, Inc. (NYSE: UTZ) manufactures a diverse portfolio of
savory snacks through popular brands including Utz®, On The Border®
Chips & Dips, Golden Flake®, Zapp’s®, Good Health®, Boulder
Canyon®, Hawaiian Brand®, and TORTIYAHS!®, among others.
After a century with strong family heritage, Utz continues to
have a passion for exciting and delighting consumers with delicious
snack foods made from top-quality ingredients. Utz’s products are
distributed nationally through grocery, mass merchandisers, club,
convenience, drug, and other channels. Based in Hanover,
Pennsylvania, Utz has multiple manufacturing facilities located
across the U.S. to serve our growing customer base. For more
information, please visit www.utzsnacks.com or call
1‐800‐FOR‐SNAX.
Investors and others should note that Utz announces material
financial information to its investors using its investor relations
website (https://investors.utzsnacks.com/investors/default.aspx),
U.S. Securities and Exchange Commission (the “Commission”) filings,
press releases, public conference calls, and webcasts. Utz uses
these channels, as well as social media, to communicate with our
stockholders and the public about the Company, the Company’s
products and other Company information. It is possible that the
information that Utz posts on social media could be deemed to be
material information. Therefore, Utz encourages investors, the
media, and others interested in the Company to review the
information posted on the social media channels listed on Utz’s
investor relations website.
Forward-Looking Statements
This press release includes certain statements made herein that
are not historical facts but are “forward-looking statements”
within the meaning of the “safe harbor” provisions of the Private
Securities Litigation Reform Act of 1995, as amended. The
forward-looking statements generally are accompanied by or include,
without limitation, statements such as “will”, “expect”, “intends”,
“goal” or other similar words, phrases or expressions. These
forward-looking statements include future plans for the Company,
the estimated or anticipated future results and benefits of the
Company’s future plans and operations, the benefits of the
Company’s productivity initiatives, the impact of the Company’s SKU
rationalization program, the effects of the Company’s marketing and
innovation initiatives, future capital structure, future
opportunities for the Company, statements regarding the Company’s
projected balance sheet and liabilities, including net leverage,
and other statements that are not historical facts. These
statements are based on the current expectations of the Company’s
management and are not predictions of actual performance. These
statements are subject to a number of risks and uncertainties and
the Company’s business and actual results may differ materially.
Factors that may cause such differences include, but are not
limited to: the risk that the Company’s gross profit margins may be
adversely impacted by a variety of factors, including variations in
raw materials pricing, retail customer requirements and mix, sales
velocities and required promotional support; changes in consumers’
loyalty to the Company’s brands due to factors beyond the Company’s
control; changes in demand for the Company’s products affected by
changes in consumer preferences and tastes or if the Company is
unable to innovate or market its products effectively; costs
associated with building brand loyalty and interest in the
Company’s products, which may be affected by actions by the
Company’s competitors’ that result in the Company’s products not
suitably differentiated from the products of their competitors;
fluctuations in results of operations of the Company from quarter
to quarter because of changes in promotional activities; the
possibility that the Company may be adversely affected by other
economic, business or competitive factors; the risk that recently
completed business combinations and other acquisitions recently
completed by the Company (collectively, the “Business
Combinations”) disrupt plans and operations; the ability to
recognize the anticipated benefits of such Business Combinations,
which may be affected by, among other things, competition and the
ability of the Company to grow and manage growth profitably and
retain its key employees; the outcome of any legal proceedings that
may be instituted against the Company following the consummation of
such Business Combinations; changes in applicable law or
regulations; costs related to the Business Combinations; the
ability of the Company to maintain the listing of the Company’s
Class A Common Stock on the New York Stock Exchange; the inability
of the Company to develop and maintain effective internal controls;
and other risks and uncertainties set forth in the section entitled
“Risk Factors” and “Forward-Looking Statements” in the Company’s
Annual Report on Form 10-K filed with the Commission, for the
fiscal year ended January 1, 2023 and other reports filed by the
Company with the Commission. In addition, forward-looking
statements provide the Company’s expectations, plans or forecasts
of future events and views as of the date of this communication.
These forward-looking statements should not be relied upon as
representing the Company’s assessments as of any date subsequent to
the date of this communication. The Company cautions investors not
to place undue reliance upon any forward-looking statements, which
speak only as of the date made. The Company does not undertake or
accept any obligation or undertaking to release publicly any
updates or revisions to any forward-looking statements to reflect
any change in its expectations or any change in events, conditions
or circumstances on which any such statement is based, except as
otherwise required by law.
Non-GAAP Financial Measures:
Utz uses non-GAAP financial information and believes 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 provide 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. These non-GAAP financial
measures do not represent financial performance in accordance with
generally accepted accounted principles in the United States
(“GAAP”) and may exclude items that are significant in
understanding and assessing financial results. Therefore, these
measures should not be considered in isolation or as an alternative
to net income, cash flows from operations or other measures of
profitability, liquidity or performance under GAAP. You should be
aware that the presentation of these measures may not be comparable
to similarly titled measures used by other companies.
Management believes that non-GAAP financial measures should be
considered as supplements to the GAAP reported measures, should not
be considered replacements for, or superior to, the GAAP measures
and may not be comparable to similarly named measures used by other
companies. We believe that these non-GAAP measures of financial
results provide useful information to investors regarding certain
financial and business trends relating to the financial condition
and results of operations of the Company to date and that the
presentation of non-GAAP financial measures is useful to investors
in the evaluation of our operating performance compared to other
companies in the salty snack industry, as similar measures are
commonly used by the companies in this industry. These non-GAAP
financial measures are subject to inherent limitations as they
reflect the exercise of judgments by management about which expense
and income are excluded or included in determining these non-GAAP
financial measures. The non-GAAP financial measures are not
recognized in accordance with GAAP and should not be viewed as an
alternative to GAAP measures of performance.
Utz uses the following non-GAAP financial measures in its
financial communications, and in the future could use others:
- Organic Net Sales
- Adjusted Gross Profit
- Adjusted Gross Profit as % of Net Sales (Adjusted Gross Profit
Margin)
- Adjusted Selling, Distribution, and Administrative Expense
- Adjusted Selling, Distribution, and Administrative Expense as %
of Net Sales
- Adjusted Net Income
- Adjusted Earnings Per Share
- EBITDA
- Adjusted EBITDA
- Adjusted EBITDA as % of Net Sales (Adjusted EBITDA Margin)
- Normalized Adjusted EBITDA
- Net Leverage Ratio
Organic Net Sales is defined
as net sales excluding the impact of acquisitions and excluding the
impact of IO route conversions.
Adjusted Gross Profit
represents Gross Profit excluding Depreciation and Amortization
expense, a non-cash item. In addition, Adjusted Gross Profit
excludes the impact of costs that fall within the categories of
non-cash adjustments and non-recurring items such as those related
to stock-based compensation, hedging and purchase commitments
adjustments, asset impairments, acquisition, and integration costs,
business transformation initiatives, and financing-related costs.
Adjusted Gross Profit is one of the key performance indicators that
our management uses to evaluate operating performance. We also
report Adjusted Gross Profit as a percentage of Net Sales as an
additional measure for investors to evaluate our Adjusted Gross
Profit margins on Net Sales.
Adjusted Selling, Distribution, and
Administrative Expense is defined as all Selling,
Distribution, and Administrative expense excluding Depreciation and
Amortization expense, a non- cash item. In addition, Adjusted
Selling, Distribution, and Administrative Expenses exclude the
impact of costs that fall within the categories of non-cash
adjustments and non-recurring items such as those related to
stock-based compensation, hedging and purchase commitments
adjustments, asset impairments, acquisition and integration costs,
business transformation initiatives, and financing-related costs.
We also report Adjusted Selling, Distribution, and Administrative
Expense as a percentage of Net Sales as an additional measure for
investors to evaluate our Adjusted Selling, Distribution, and
Administrative margin on Net Sales.
Adjusted Net Income is
defined as Net Income excluding the additional Depreciation and
Amortization expense, a non-cash item, related to the Business
Combination with Collier Creek Holdings and the acquisitions of
Kennedy Endeavors, Kitchen Cooked, Inventure, Golden Flake, Truco
Enterprises, R.W. Garcia and Festida. In addition, Adjusted Net
Income is also adjusted to exclude deferred financing fees,
interest income, and expense relating to IO loans and certain
non-cash items, such as those related to stock-based compensation,
hedging, and purchase commitments adjustments, asset impairments,
acquisition and integration costs, business transformation
initiatives, remeasurement of warrant liabilities and
financing-related costs. Lastly, Adjusted Net Income normalizes the
income tax provision to account for the above-mentioned
adjustments.
Adjusted Earnings Per Share
is defined as Adjusted Net Income (as defined, herein) divided by
the weighted average shares outstanding for each period on a fully
diluted basis, assuming the Private Placement Warrants are net
settled and the Shares of Class V Common Stock held by Continuing
Members is converted to Class A Common Stock.
EBITDA is defined as Net
Income before Interest, Income Taxes, and Depreciation and
Amortization.
Adjusted EBITDA is defined
as EBITDA further adjusted to exclude certain non-cash items, such
as stock-based compensation, hedging and purchase commitments
adjustments, and asset impairments; acquisition and integration
costs; 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 Adjusted
EBITDA is useful to the users of this release and financial
information contained in the release 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. We have historically reported an Adjusted EBITDA
metric to investors and banks for covenant compliance. We also
provide in this release, Adjusted EBITDA as a percentage of Net
Sales, as an additional measure for readers to evaluate our
Adjusted EBITDA margins on Net Sales.
Normalized Adjusted EBITDA
is defined as Adjusted EBITDA after giving effect to
pre-acquisition Adjusted EBITDA of the Festida Foods and R.W.
Garcia acquisitions, and the buyout of Clem and J&D Snacks.
Net Leverage Ratio is
defined as Normalized Adjusted EBITDA divided by Net Debt. Net Debt
is defined as Gross Debt less Cash and Cash Equivalents.
Management believes that the non-GAAP financial measures are
meaningful to investors because they increase transparency and
assist investors to understand and analyze our ongoing operational
performance. The financial measures are shown as supplemental
disclosures in this release because they are widely used by the
investment community for analysis and comparative evaluation. They
also provide additional metrics to evaluate the Company’s
operations and, when considered with both the GAAP results and the
reconciliation to the most comparable GAAP measures, provide a more
complete understanding of the Company’s business than could be
obtained absent this disclosure. The non-GAAP measures are not and
should not be considered an alternative to the most comparable GAAP
measures or any other figure calculated in accordance with GAAP, or
as an indicator of operating performance. The Company’s calculation
of the non-GAAP financial measures may differ from methods used by
other companies. Management believes that the non-GAAP measures are
important to have an understanding of the Company’s overall
operating results in the periods presented. The non-GAAP financial
measures are not recognized in accordance with GAAP and should not
be viewed as an alternative to GAAP measures of performance. 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.
Utz Brands, Inc.
CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE INCOME
For the thirteen weeks ended
October 1, 2023 and October 2, 2022
(In thousands, except share
information)
(Unaudited)
(in thousands)
Thirteen weeks ended October
1, 2023
Thirteen weeks ended October
2, 2022
Net sales
$
371,852
$
362,818
Cost of goods sold
252,583
244,545
Gross profit
119,269
118,273
Selling, distribution, and
administrative expenses
Selling and distribution
70,973
69,263
Administrative
34,531
33,182
Total selling, distribution, and
administrative expenses
105,504
102,445
Loss on sale of assets, net
(8,488
)
(823
)
Income from operations
5,277
15,005
Other income (expense)
Interest expense
(15,537
)
(11,648
)
Other income
392
205
Gain (loss) on remeasurement of warrant
liability
15,984
(3,672
)
Other income (expense), net
839
(15,115
)
Income (loss) before taxes
6,116
(110
)
Income tax benefit
(10,099
)
(1,595
)
Net income
16,215
1,485
Net income attributable to noncontrolling
interest
(222
)
(2,373
)
Net income (loss) attributable to
controlling interest
$
15,993
$
(888
)
Earnings per Class A Common stock: (in
dollars)
Basic
$
0.20
$
(0.01
)
Diluted
$
0.19
$
(0.01
)
Weighted-average shares of Class A
Common stock outstanding
Basic
81,141,417
80,812,835
Diluted
83,444,275
80,812,835
Net income
$
16,215
$
1,485
Other comprehensive income:
Change in fair value of interest rate
swap
4,047
19,655
Comprehensive income
20,262
21,140
Net comprehensive (income) loss
attributable to noncontrolling interest
(1,932
)
(10,696
)
Net comprehensive income attributable to
controlling interest
$
18,330
$
10,444
Utz Brands, Inc.
CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE INCOME
For the thirty-nine weeks
ended October 1, 2023 and October 2, 2022
(In thousands, except share
information)
(Unaudited)
(in thousands)
Thirty-nine weeks ended
October 1, 2023
Thirty-nine weeks ended
October 2, 2022
Net sales
$
1,086,138
$
1,053,732
Cost of goods sold
744,980
720,123
Gross profit
341,158
333,609
Selling, distribution, and
administrative expenses
Selling and distribution
202,888
226,169
Administrative
123,155
110,549
Total selling, distribution, and
administrative expenses
326,043
336,718
(Loss) gain on sale of assets,
net
(9,275
)
919
Income (loss) from operations
5,840
(2,190
)
Other (expense) income
Interest expense
(44,934
)
(31,478
)
Other income
2,279
80
Gain on remeasurement of warrant
liability
16,560
4,032
Other expense, net
(26,095
)
(27,366
)
Loss before taxes
(20,255
)
(29,556
)
Income tax benefit
(13,435
)
(1,688
)
Net loss
(6,820
)
(27,868
)
Net loss attributable to noncontrolling
interest
9,562
12,589
Net income (loss) attributable to
controlling interest
$
2,742
$
(15,279
)
Income (loss) per Class A Common stock:
(in dollars)
Basic
$
0.03
$
(0.19
)
Diluted
$
0.03
$
(0.19
)
Weighted-average shares of Class A
Common stock outstanding
Basic
81,060,961
79,852,137
Diluted
83,567,756
79,852,137
Net loss
$
(6,820
)
$
(27,868
)
Other comprehensive income:
Change in fair value of interest rate
swap
3,294
50,475
Comprehensive (loss) income
(3,526
)
22,607
Net comprehensive loss (income)
attributable to noncontrolling interest
8,173
(8,981
)
Net comprehensive income (loss)
attributable to controlling interest
$
4,647
$
13,626
Utz Brands, Inc.
CONSOLIDATED BALANCE
SHEETS
October 1, 2023 and January 1,
2023
(In thousands)
As of October 1,
2023
As of January 1, 2023
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents
$
60,094
$
72,930
Accounts receivable, less allowance of
$2,638 and $1,815, respectively
132,038
136,985
Inventories
116,674
118,006
Prepaid expenses and other assets
44,196
34,991
Current portion of notes receivable
5,553
9,274
Total current assets
358,555
372,186
Non-current Assets
Property, plant and equipment, net
329,846
345,198
Goodwill
915,295
915,295
Intangible assets, net
1,070,691
1,099,565
Non-current portion of notes
receivable
13,246
12,794
Other assets
109,267
95,328
Total non-current assets
2,438,345
2,468,180
Total assets
$
2,796,900
$
2,840,366
LIABILITIES AND EQUITY
Current Liabilities
Current portion of term debt
$
20,649
$
18,472
Current portion of other notes payable
8,317
12,589
Accounts payable
135,931
114,360
Accrued expenses and other
62,714
92,012
Total current liabilities
227,611
237,433
Non-current portion of term debt and
revolving credit facility
895,172
893,335
Non-current portion of other notes
payable
19,496
20,339
Non-current accrued expenses and other
75,551
67,269
Non-current warrant liability
28,944
45,504
Deferred tax liability
114,059
124,802
Total non-current liabilities
1,133,222
1,151,249
Total liabilities
1,360,833
1,388,682
Commitments and Contingencies
Equity
Shares of Class A Common Stock, $0.0001
par value; 1,000,000,000 shares authorized; 81,141,417 and
80,882,334 shares issued and outstanding as of October 1, 2023 and
January 1, 2023, respectively
8
8
Shares of Class V Common Stock, $0.0001
par value; 61,249,000 shares authorized; 59,349,000 shares issued
and outstanding as of October 1, 2023 and January 1, 2023
6
6
Additional paid-in capital
938,898
926,919
Accumulated deficit
(265,743
)
(254,564
)
Accumulated other comprehensive income
32,682
30,777
Total stockholders' equity
705,851
703,146
Noncontrolling interest
730,216
748,538
Total equity
1,436,067
1,451,684
Total liabilities and equity
$
2,796,900
$
2,840,366
Utz Brands, Inc.
CONSOLIDATED STATEMENTS OF
CASH FLOWS
For the thirty-nine weeks
ended October 1, 2023 and October 2, 2022
(In thousands)
(Unaudited)
Thirty-nine weeks ended
October 1, 2023
Thirty-nine weeks ended
October 2, 2022
Cash flows from operating
activities
Net loss
$
(6,820
)
$
(27,868
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Impairment and other charges
9,548
4,678
Depreciation and amortization
60,114
66,345
Gain on remeasurement of warrant
liability
(16,560
)
(4,032
)
Loss (gain) on sale of assets
9,275
(919
)
Share-based compensation
11,808
7,579
Deferred taxes
(10,743
)
(1,315
)
Deferred financing costs
1,084
1,047
Changes in assets and liabilities:
Accounts receivable, net
4,947
(12,628
)
Inventories
644
(27,866
)
Prepaid expenses and other assets
(20,183
)
(18,308
)
Accounts payable and accrued expenses and
other
6,016
21,358
Net cash provided by operating
activities
49,130
8,071
Cash flows from investing
activities
Acquisitions, net of cash acquired
—
(75
)
Purchases of property and equipment
(45,707
)
(68,708
)
Proceeds from sale of property and
equipment
8,794
4,100
Proceeds from sale of routes
21,683
16,819
Proceeds from the sale of IO notes
4,094
5,017
Proceeds from insurance claims for capital
investments
—
3,935
Notes receivable, net
(26,369
)
(14,028
)
Net cash used in investing activities
(37,505
)
(52,940
)
Cash flows from financing
activities
Line of credit borrowings, net
20,324
40,390
Borrowings on term debt and notes
payable
4,273
33,969
Repayments on term debt and notes
payable
(23,744
)
(20,692
)
Payment of debt issuance cost
(655
)
(1,471
)
Payments of tax withholding requirements
for employee stock awards
(589
)
(6,217
)
Proceeds from issuance of shares
—
28,000
Dividends
(13,921
)
(12,793
)
Distribution to noncontrolling
interest
(10,149
)
(6,410
)
Net cash (used in) provided by financing
activities
(24,461
)
54,776
Net (decrease) increase in cash and cash
equivalents
(12,836
)
9,907
Cash and cash equivalents at beginning
of period
72,930
41,898
Cash and cash equivalents at end of
period
$
60,094
$
51,805
Reconciliation of Non-GAAP Financial
Measures to Reported Financial Measures
Net Sales and Organic Net Sales
13-Weeks Ended
39-Weeks Ended
(dollars in millions)
October 1, 2023
October 2, 2022
Change
October 1, 2023
October 2, 2022
Change
Net Sales as Reported
$
371.9
$
362.8
2.5
%
$
1,086.1
$
1,053.7
3.1
%
Impact of Acquisitions
—
—
—
—
Impact of IO Conversions
2.3
—
7.6
—
Organic Net Sales
$
374.2
$
362.8
3.1
%
$
1,093.7
$
1,053.7
3.8
%
(1)
Organic Net Sales excludes the Impact of
Acquisitions and the Impact of IO Conversions that took place after
Q2 2022.
Gross Profit and Adjusted Gross
Profit
13-Weeks Ended
39-Weeks Ended
(dollars in millions)
October 1, 2023
October 2, 2022
October 1, 2023
October 2, 2022
Gross Profit
$
119.3
$
118.3
$
341.2
$
333.6
Depreciation and Amortization
8.3
10.3
25.9
31.8
Non-Cash, Non-recurring adjustments
7.5
4.0
15.9
8.9
Adjusted Gross Profit
$
135.1
$
132.6
$
383.0
$
374.3
Adjusted Gross Profit as a % of Net
Sales
36.3
%
36.5
%
35.3
%
35.5
%
Adjusted Selling, Distribution, and
Administrative Expense
13-Weeks Ended
39-Weeks Ended
(dollars in millions)
October 1, 2023
October 2, 2022
October 1, 2023
October 2, 2022
Selling, Distribution, and
Administrative Expense
$
105.5
$
102.4
$
326.0
$
336.7
Depreciation and Amortization in SD&A
Expense
(11.4
)
(11.5
)
(34.2
)
(34.5
)
Non-Cash, and/or Non-recurring
Adjustments
(11.1
)
(6.4
)
(46.6
)
(54.6
)
Adjusted Selling, Distribution, and
Administrative Expense
$
83.0
$
84.5
$
245.2
$
247.6
Adjusted SD&A Expense as a % of Net
Sales
22.3
%
23.3
%
22.6
%
23.5
%
Adjusted Net Income
13-Weeks Ended
39-Weeks Ended
(dollars in millions, except per share
data)
October 1, 2023
October 2, 2022
October 1, 2023
October 2, 2022
Net Income (Loss)
$
16.2
$
1.5
$
(6.8
)
$
(27.9
)
Income Tax (Benefit) Expense
(10.1
)
(1.6
)
(13.4
)
(1.7
)
Income (Loss) Before Taxes
6.1
(0.1
)
(20.2
)
(29.6
)
Deferred Financing Fees
0.6
0.3
1.1
1.0
Acquisition Step-Up Depreciation and
Amortization
12.0
13.2
35.6
39.6
Certain Non-Cash Adjustments
24.5
0.9
42.2
9.2
Acquisition and Integration
1.3
4.8
8.7
40.8
Business and Transformation
Initiatives
1.4
5.4
19.9
13.3
Financing-Related Costs
0.1
—
0.2
0.2
(Gain) Loss on Remeasurement of Warrant
Liability
(16.0
)
3.7
(16.6
)
(4.0
)
Other Non-Cash and/or Non-Recurring
Adjustments
23.9
28.3
91.1
100.1
Adjusted Earnings before Taxes
30.0
28.2
70.9
70.5
Taxes on Earnings as Reported
10.1
1.6
13.4
1.7
Income Tax Adjustments(1)
(15.5
)
(7.3
)
(25.9
)
(16.0
)
Adjusted Taxes on Earnings
(5.4
)
(5.7
)
(12.5
)
(14.3
)
Adjusted Net Income
$
24.6
$
22.5
$
58.4
$
56.2
Average Weighted Basic Shares Outstanding
on an As-Converted Basis
140.5
140.2
140.4
139.2
Fully Diluted Shares on an As-Converted
Basis
142.8
142.5
142.9
141.1
Adjusted Earnings Per Share
$
0.17
$
0.16
$
0.41
$
0.40
(1)
Income Tax Adjustment calculated as (Loss)
Income before taxes plus (i) Acquisition, Step-Up Depreciation and
Amortization and (ii) Other Non-Cash and/or Non-Recurring
Adjustments, multiplied by a normalized GAAP effective tax rate,
minus the actual tax provision recorded in the Consolidated
Statement of Operations and Comprehensive Loss. The normalized GAAP
effective tax rate excludes one-time items such as the impact of
tax rate changes on deferred taxes and changes in valuation
allowances.
Depreciation & Amortization
13-Weeks Ended
39-Weeks Ended
(dollars in millions)
October 1, 2023
October 2, 2022
October 1, 2023
October 2, 2022
Core D&A - Non-Acquisition-related
included in Gross Profit
$
5.4
$
6.2
$
17.5
$
19.5
Step-Up D&A - Transaction-related
included in Gross Profit
2.9
4.1
8.4
12.3
Depreciation & Amortization -
included in Gross Profit
8.3
10.3
25.9
31.8
Core D&A - Non-Acquisition-related
included in SD&A Expense
2.3
2.4
7
7.2
Step-Up D&A - Transaction-related
included in SD&A Expense
9.1
9.1
27.2
27.3
Depreciation & Amortization -
included in SD&A Expense
11.4
11.5
34.2
34.5
Depreciation & Amortization -
Total
$
19.7
$
21.8
$
60.1
$
66.3
Core Depreciation and Amortization
$
7.7
$
8.6
$
24.5
$
26.7
Step-Up Depreciation and Amortization
12.0
13.2
35.6
39.6
Total Depreciation and
Amortization
$
19.7
$
21.8
$
60.1
$
66.3
EBITDA and Adjusted EBITDA
13-Weeks Ended
39-Weeks Ended
(dollars in millions)
October 1, 2023
October 2, 2022
October 1, 2023
October 2, 2022
Net Income (Loss)
$
16.2
$
1.5
$
(6.8
)
$
(27.9
)
Plus non-GAAP adjustments:
Income Tax (Benefit) Expense
(10.1
)
(1.6
)
(13.4
)
(1.7
)
Depreciation and Amortization
19.7
21.8
60.1
66.3
Interest Expense, Net
15.5
11.6
44.9
31.5
Interest Income from IO loans(1)
(0.5
)
(0.4
)
(1.4
)
(1.3
)
EBITDA
40.8
32.9
83.4
66.9
Certain Non-Cash Adjustments(2)
24.5
0.9
42.2
9.2
Acquisition and Integration(3)
1.3
4.8
8.7
40.8
Business Transformation Initiatives(4)
1.4
5.4
19.9
13.3
Financing-Related Costs(5)
0.1
—
0.2
0.2
(Gain) loss on Remeasurement of Warrant
Liabilities(6)
(16.0
)
3.7
(16.6
)
(4.0
)
Adjusted EBITDA
$
52.1
$
47.7
$
137.8
$
126.4
Net income (loss) as a % of Net
Sales
4.4
%
0.4
%
(0.6
)%
(2.6
)%
Adjusted EBITDA as a % of Net
Sales
14.0
%
13.1
%
12.7
%
12.0
%
(1)
Interest Income from IO loans refers to
Interest Income that we earn from IO notes receivable that have
resulted from our initiatives to transition from route sales
professionals (“RSP”) distribution to IO distribution.. 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
$3.7 million and $1.9 million of share-based compensation expense,
that was awarded to associates and directors, and compensation
expense associated with the employee stock purchase plan for the
thirteen weeks ended October 1, 2023 and October 2, 2022,
respectively. The Company incurred $11.8 million and $6.7 million
of share-based compensation, that was awarded to associates and
directors, and compensation expense associated with the employee
stock purchase plan for the thirty-nine weeks ended October 1, 2023
and October 2, 2022, respectively.
Asset Impairments and Write-Offs — For the
thirteen weeks ended October 1, 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, IN plant along with the
transfer of $4.7 million from business transformation initiatives
described in note (4) below related to the termination of a
contract that was settled with the sale. During the thirty-nine
weeks ended October 1, 2023, the Company recorded impairments and
non-cash loss on sale totaling $23.3 million. During the
thirty-nine weeks ended October 2, 2022, the Company recorded an
impairment of $2.0 million related to the termination of a
distribution agreements.
Purchase Commitments and Other Adjustments
– We have purchase commitments and options 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
commitments and options related unrealized gains and losses. The
adjustment related to Purchase Commitment and Other non-cash
adjustment (gains) losses were $1.4 million and $(1.0) million for
the thirteen weeks ended October 1, 2023 and October 2, 2022,
respectively. The thirty-nine weeks ended October 1, 2023 and
October 2, 2022 also included $1.40 million and $0.5 million
of unrealized purchase commitment losses, respectively.
Additionally, we recorded $0.9 million for the amortization of
cloud-based computing assets for the thirteen and thirty-nine weeks
ended, October 1, 2023.
(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 $1.2 million and $9.5
million for the thirteen and thirty-nine weeks ended October 1,
2023, respectively, as well as $0.1 million of expense and $0.8
million of income for the change of the Tax Receivable Agreement
Liability associated with the Business Combination for the thirteen
and thirty-nine weeks ended October 1, 2023, respectively. Charges
related to the buyout of multiple distributors, which was accounted
for as a contract termination resulted in expense of $23.0 million
for the thirty-nine week period ended October 2, 2022.
Additionally, other acquisitions and integration cost of $4.8
million and $16.8 million were recorded for the thirteen and
thirty-nine weeks ended October 2, 2022, respectively, also
included are adjustment of $1.0 million of expense for the
increase of the Tax Receivable Agreement Liability associated with
the Business Combination for the thirty-nine week period ended
October 2, 2022.
(4)
Business Transformation Initiatives
Adjustment – This adjustment is related to consultancy,
professional, legal, closure and other expenses 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 transition costs, fall into this category. The
Company incurred such costs of $6.1 million and $5.4 million for
the thirteen weeks ended October 1, 2023 and October 2, 2022,
respectively, and $24.6 million and $13.3 million for the
thirty-nine weeks ended October 1, 2023 and October 2, 2022,
respectively, which included the closure of our Gramercy, LA and
Birmingham, AL plants along with various other supply chain,
commercial and administrative initiatives. Additionally, as noted
above, the costs for the thirteen and thirty-nine weeks ended
October 1, 2023 also includes a transfer of expense of $(4.7)
million related to a contract termination that was not settled in
cash. During 2023, we completed the closure of our Gramercy,
LA and Birmingham, AL manufacturing plants along with the sale of
our Bluffton, IN manufacturing plant.
(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 related to the changes in
the remeasurement of warrant 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.
Normalized Adjusted EBITDA
FY 2022
FY 2023
(dollars in millions)
Q1
Q2
Q3
Q4
FY 2022
Q1
Q2
Q3
Trailing 52-weeks
Adjusted EBITDA
$
36.5
$
42.2
$
47.7
$
44.1
$
170.5
$
40.4
$
45.2
$
52.1
$
181.8
Pre-Acquisition Adjusted EBITDA(1)
0.2
—
—
—
0.2
—
—
—
—
Normalized Adjusted EBITDA
$
36.7
$
42.2
$
47.7
$
44.1
$
170.7
$
40.4
$
45.2
$
52.1
$
181.8
(1)
Pre-Acquisition Adjusted EBITDA - This
adjustment represents the Adjusted EBITDA of acquired companies,
prior to the acquisition date, as well as from the buyout date of
Clem and J&D Snacks.
Net Debt and Leverage Ratio
(dollars in millions)
As of October 1, 2023
Term Loan
$
773.3
Real Estate Loan
81.0
ABL Facility
20.4
Capital Leases(1)
61.1
Deferred Purchase Price
0.2
Gross Debt(2)
936.0
Cash and Cash Equivalents
60.1
Total Net Debt
$
875.9
Last 52-Weeks Normalized Adjusted
EBITDA
$
181.8
Net Leverage Ratio(3)
4.8x
(1)
Capital Leases include equipment term
loans and excludes the impact of step-up accounting.
(2)
Excludes amounts related to guarantees on
IO loans which are collateralized by routes. We have the ability to
recover substantially all of the outstanding loan value in the
event of a default scenario, which historically has been
uncommon.
(3)
Based on Normalized Adjusted EBITDA of
$181.8 million.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231109756969/en/
Investors Kevin Powers Utz Brands, Inc.
kpowers@utzsnacks.com
Media Kevin Brick Utz Brands, Inc.
kbrick@utzsnacks.com
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