10-Q 1 utz-20220403.htm 10-Q utz-20220403
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 3, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
 
  
Utz Brands, Inc.
(Exact name of registrant as specified in its charter)
  
Delaware 001-38686 85-2751850
(State or other jurisdiction
of incorporation)
 (Commission File Number) (IRS Employer
Identification No.)
 
900 High Street
Hanover, PA 17331
(Address of principal executive offices, including zip code)
 
Registrant’s telephone number, including area code: (717) 637-6644

N/A
(Former name or former address, if changed since last report)
  
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per share
UTZ
New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ⌧




As of May 11, 2022, 80,728,900 Class A Common Stock, par value $0.0001 per share, and 59,349,000 Class V Common Stock, par value $0.0001 per share, were issued and outstanding.

INTRODUCTORY NOTE

On August 28, 2020 (the "Closing Date"), Utz Brands, Inc. (formerly Collier Creek Holdings) ("the Company"), consummated a business combination (the "Business Combination") with Utz Brands Holdings, LLC ("UBH") pursuant to the terms of the Business Combination Agreement, dated as of June 5, 2020 (the "Business Combination Agreement"), entered into by and among the Company, UBH, and Series U of UM Partners, LLC ("Series U") and Series R of UM Partners, LLC ("Series R" and together with Series U, the "Continuing Members"). Additional information about the Business Combination can be found in our Annual Report on Form 10-K for the year ended January 2, 2022.
Throughout this Quarterly Report on Form 10-Q, unless otherwise noted "the Company", "we", "us", "our", "UBI" and "Utz" refer to Utz Brands, Inc. and its consolidated subsidiaries.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS


This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to expectations for future financial performance, business strategies or expectations for the Company’s business. Specifically, forward-looking statements may include statements relating to:

The financial position, capital structure, indebtedness, business strategy and plans and objectives of management for future operations
The benefits of the Business Combination and subsequent acquisitions, dispositions and similar transactions;
The future performance of, and anticipated financial impact on, the Company;
Expansion plans and opportunities; and
Other statements preceded by, followed by or that include the words "may," "can," "should," "will," "estimate," "plan," "project," "forecast," "intend," "expect," "anticipate," "believe," "seek," "target" or similar expressions.

These forward-looking statements are based on information available as of the date of this Quarterly Report on Form 10-Q and the Company management’s current expectations, forecasts and assumptions, and involve a number of judgments, known and unknown risks and uncertainties and other factors, many of which are outside the control of the Company and its directors, officers and affiliates. Accordingly, forward-looking statements should not be relied upon as representing the Company’s views as of any subsequent date. The Company does not undertake any obligation to update, add or to otherwise correct any forward-looking statements contained herein to reflect events or circumstances after the date they were made, whether as a result of new information, future events, inaccuracies that become apparent after the date hereof or otherwise, except as may be required under applicable securities laws.
As a result of a number of known and unknown risks and uncertainties, the Company’s results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ are described under Part I, Item 1A "Risk Factors" in our Annual Report on Form 10-K for the year ended January 2, 2022. There have been no material changes to our risk factors since the filing of the Form 10-K.






PART I – FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

Utz Brands, Inc.
CONSOLIDATED BALANCE SHEETS
April 3, 2022 and January 2, 2022
(In thousands)
 
As of
April 3, 2022
As of January 2, 2022
 (Unaudited)
ASSETS
Current Assets
Cash and cash equivalents$14,899 $41,898 
Accounts receivable, less allowance of $1,302 and $1,391, respectively
148,432 131,388 
Inventories93,778 79,517 
Prepaid expenses and other assets17,042 18,395 
Current portion of notes receivable6,401 6,706 
Total current assets280,552 277,904 
Non-current Assets
Property, plant and equipment, net298,656 303,807 
Goodwill915,490 915,438 
Intangible assets, net1,130,208 1,142,509 
Non-current portion of notes receivable19,614 20,725 
Other assets78,505 55,963 
Total non-current assets2,442,473 2,438,442 
Total assets$2,723,025 $2,716,346 
LIABILITIES AND EQUITY
Current Liabilities
Current portion of term debt$11,414 $11,414 
Current portion of other notes payable13,057 9,957 
Accounts payable104,967 95,369 
Accrued expenses and other53,356 71,280 
Total current liabilities182,794 188,020 
  Non-current portion of term debt and revolving credit facility852,722 830,548 
  Non-current portion of other notes payable23,129 24,709 
  Non-current accrued expenses and other56,109 55,838 
  Non-current warrant liability44,280 46,224 
  Deferred tax liability136,837 136,334 
Total non-current liabilities1,113,077 1,093,653 
Total liabilities1,295,871 1,281,673 
Commitments and Contingencies
Equity
Shares of Class A Common Stock, $0.0001 par value; 1,000,000,000 shares authorized; 78,597,175 and 77,644,645 shares issued and outstanding as of April 3, 2022 and January 2, 2022, 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 April 3, 2022 and January 2, 2022.
6 6 
Additional paid-in capital909,144 912,574 
Accumulated deficit (254,168)(236,598)
Accumulated other comprehensive income19,558 3,715 
Total stockholders' equity674,548 679,705 
Noncontrolling interest752,606 754,968 
Total equity1,427,154 1,434,673 
Total liabilities and equity$2,723,025 $2,716,346 
The accompanying notes are an integral part of these consolidated financial statements.
1


Utz Brands, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
For the thirteen weeks ended April 3, 2022 and April 4, 2021
(In thousands, except share information)
(Unaudited)
Thirteen weeks ended April 3, 2022Thirteen weeks ended April 4, 2021
Net sales$340,767 $269,182 
Cost of goods sold236,960 173,941 
Gross profit103,807 95,241 
Selling, distribution, and administrative expenses
Selling and distribution88,110 56,728 
Administrative38,551 29,933 
Total selling, distribution, and administrative expenses126,661 86,661 
Gain on sale of assets, net367 719 
(Loss) income from operations(22,487)9,299 
Other (expense) income
Interest expense(9,103)(10,861)
Other income520 718 
Gain (loss) on remeasurement of warrant liability 1,944 (21,501)
Other (expense) income, net(6,639)(31,644)
Loss before taxes(29,126)(22,345)
Income tax expense2,772 1,004 
Net loss(31,898)(23,349)
Net loss attributable to noncontrolling interest14,328 820 
Net loss attributable to controlling interest$(17,570)$(22,529)
Earnings (loss) per Class A Common stock: (in dollars)
Basic & diluted$(0.22)$(0.30)
Weighted-average shares of Class A Common stock outstanding
Basic & diluted78,572,404 75,927,005 
Net loss$(31,898)$(23,349)
Other comprehensive income:
Change in fair value of interest rate swap27,809 822 
Comprehensive loss(4,089)(22,527)
Net comprehensive loss attributable to noncontrolling interest2,362  
Net comprehensive loss attributable to controlling interest$(1,727)$(22,527)

The accompanying notes are an integral part of these consolidated financial statements.
2


Utz Brands, Inc.
CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)
For the thirteen weeks ended April 3, 2022 and April 4, 2021
(In thousands, except share data)
(Unaudited)

Class A Common StockClass V Common StockAdditional Paid-in CapitalAccumulated (Deficit)Accumulated Other Comprehensive IncomeTotal Stockholders' EquityNon-controlling InterestTotal Equity
SharesAmountSharesAmount
Balance at January 3, 202171,094,714 $7 60,349,000 $6 $793,461 $(241,490)$924 $552,908 $831,994 $1,384,902 
Conversion of warrants4,976,717 — — 144,659 — — 144,659 (32,714)111,945 
Share-based compensation410,402 — — 2,883 — — 2,883 — 2,883 
Net loss— — — (22,529)— (22,529)(820)(23,349)
Other comprehensive income— — — — 822 822 — 822 
Balance at April 4, 202176,481,833 $7 60,349,000 $6 $941,003 $(264,019)$1,746 $678,743 $798,460 $1,477,203 
Balance at January 2, 202277,644,645 $8 59,349,000 $6 $912,574 $(236,598)$3,715 $679,705 $754,968 $1,434,673 
Payments of tax withholding requirements for employee stock awards— — (6,217)— — (6,217)— (6,217)
Share-based compensation952,530 — — 1,379 — — 1,379 — 1,379 
Tax impact arising from share issuance— — 1,408 — — 1,408 — 1,408 
Net loss— — — (17,570)— (17,570)(14,328)(31,898)
Other comprehensive income— — — — 15,843 15,843 11,966 27,809 
Balance at April 3, 202278,597,175 $8 59,349,000 $6 $909,144 $(254,168)$19,558 $674,548 $752,606 $1,427,154 

The accompanying notes are an integral part of these consolidated financial statements.
3


Utz Brands, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the thirteen weeks ended April 3, 2022 and April 4, 2021
(In thousands)
(Unaudited)
Thirteen weeks ended April 3, 2022Thirteen weeks ended April 4, 2021
Cash flows from operating activities
Net loss$(31,898)$(23,349)
Adjustments to reconcile net loss to net cash used in operating activities:
Impairment and other charges3,319  
Depreciation and amortization22,121 19,407 
(Gain) loss on remeasurement of warrant liability (1,944)21,501 
Gain on sale of assets(367)(719)
Share-based compensation1,379 2,883 
Deferred taxes1,912 1,061 
Deferred financing costs341 2,870 
Changes in assets and liabilities:
Accounts receivable, net(17,044)(11,176)
Inventories(14,261)(7,040)
Prepaid expenses and other assets(26)866 
Accounts payable and accrued expenses and other464 (19,487)
Net cash used in operating activities(36,004)(13,183)
Cash flows from investing activities
Acquisitions, net of cash acquired(75)(25,189)
Purchases of property and equipment(8,137)(2,134)
Purchases of intangibles— (1,200)
Proceeds from sale of property and equipment1,138 391 
Proceeds from sale of routes4,604 1,450 
Proceeds from the sale of IO notes— 2,295 
Proceeds from insurance claims2,000  
Notes receivable, net221 (924)
Net cash used in investing activities(249)(25,311)
Cash flows from financing activities
Line of credit borrowings, net 20,000 15,000 
Borrowings on term debt and notes payable8,726 720,000 
Repayments on term debt and notes payable(9,066)(783,735)
Payment of debt issuance cost— (8,372)
Payments of tax withholding requirements for employee stock awards(6,217) 
Exercised warrants— 57,232 
Dividends (4,189)(4,261)
Distribution to noncontrolling interest— (181)
Net cash provided by (used in) financing activities9,254 (4,317)
Net decrease in cash and cash equivalents(26,999)(42,811)
Cash and cash equivalents at beginning of period41,898 46,831 
Cash and cash equivalents at end of period$14,899 $4,020 
The accompanying notes are an integral part of these consolidated financial statements.
4


Utz Brands, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation – The accompanying consolidated financial statements comprise the financial statements of Utz Brands, Inc. ("UBI" or the "Company", formerly Collier Creek Holdings ("CCH")) and its wholly owned subsidiaries. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial statements and pursuant to the accounting and disclosure rules and regulations of the U.S. Securities and Exchange Commission (the "SEC"). They do not include all information and notes required by US GAAP for annual financial statements. However, except as disclosed herein, there has been no material changes in the information disclosed in the Notes to Consolidated Financial Statements included in the Company’s financial statements for the year ended January 2, 2022. The balance sheet as of January 2, 2022 has been derived from the audited combined financial statements as of and for the year ended January 2, 2022. In the opinion of management, such financial information reflects all normal and recurring adjustments necessary for a fair presentation of the financial position and the results of operations for such interim periods in accordance with the US GAAP. Operating results for the interim period are not necessarily indicative of the results that may be expected for any future period or for the full year. The consolidated interim financial statements, including our significant accounting policies, should be read in conjunction with the audited combined financial statements and notes thereto for the year ended January 2, 2022.
All intercompany transactions and balances have been eliminated in consolidation.
Reclassification – Certain prior year amounts have been reclassified for consistency with the current year presentation. In our Q1 Consolidated Statement of Profit and Loss and Consolidated Statement of Cash flows, we began combining gain on disposal of property, plant and equipment, net and gain on sale of routes, net, into one line item as gain on sale of assets to simplify our reporting presentation. The reclassification had no impact on total operating costs, earnings from operations, net earnings, earnings per share or total equity.
Operations – The Company through its subsidiary, Utz Quality Foods, LLC ("UQF"), is a premier producer, marketer and distributor of snack food products since 1921. The Company has steadily expanded its distribution channels to where it now sells products to supermarkets, mass merchants, club stores, dollar and discount stores, convenience stores, independent grocery stores, drug stores, food service, vending, military, and other channels in most regions of the United States through routes to market that include direct-store-delivery, direct to warehouse, and third-party distributors. The Company manufactures and distributes a full line of high-quality salty snack items, such as potato chips, tortilla chips, pretzels, cheese balls, pork skins, party mixes, and popcorn. The Company also sells dips, crackers, dried meat products and other snack food items packaged by other manufacturers.
Cash and Cash Equivalents – The Company considers all highly-liquid investments purchased with an original maturity of three months or less to be cash equivalents. The majority of the Company’s cash is held in financial institutions with insurance provided by the Federal Deposit Insurance Corporation ("FDIC") of $250,000 per depositor. At various times, account balances may exceed federally insured limits.
Accounts Receivables – Accounts receivable are reported at net realizable value. The net realizable value is based on management’s estimate of the amount of receivables that will be collected based on analysis of historical data and trends, as well as review of significant customer accounts. Accounts receivable are considered to be past due when payments are not received within the customer’s credit terms. Accounts are written off when management determines the account is uncollectible. Finance charges are not usually assessed on past-due accounts.
Inventories – Inventories are stated at the lower of cost (first-in, first-out) or net realizable value. Inventory write-downs are recorded for shrinkage, damaged, stale and slow-moving items.

5


Property, Plant and Equipment – Property, plant and equipment are stated at cost net of accumulated depreciation. Major additions and betterments are recorded to the asset accounts, while maintenance and repairs, which do not improve or extend the lives of the assets, are charged to expense accounts as incurred. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in operations in the disposal period. Depreciation is determined utilizing the straight-line method over the estimated useful lives of the various assets, which generally range from 2 to 20 years for machinery and equipment, 3 to 10 years for transportation equipment and 8 to 40 years for buildings. Assets held for sale are reported at the lower of the carrying amount or fair value less costs to sell. The Company assesses for impairment on property, plant and equipment upon the occurrence of a triggering event.

Income Taxes – The Company accounts for income taxes pursuant to the asset and liability method of ASC 740, Income Taxes, which requires it to recognize current tax liabilities or receivables for the amount of taxes it estimates are payable or refundable for the current year, and deferred tax assets and liabilities for the expected future tax consequences attributable to temporary differences between the financial statement carrying amounts and their respective tax bases of assets and liabilities and the expected benefits of net operating loss and credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period enacted. A valuation allowance is provided when it is more likely than not that a portion or all of a deferred tax asset will not be realized. 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.
The Company follows the provisions of ASC 740-10 related to the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. ASC 740-10 prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns.
The benefit of tax positions taken or expected to be taken in the Company’s income tax returns is recognized in the financial statements if such positions are more likely than not of being sustained upon examination by taxing authorities. Differences between tax positions taken or expected to be taken in a tax return and the benefit recognized and measured pursuant to the interpretation are referred to as "unrecognized benefits". A liability is recognized (or amount of net operating loss carryover or amount of tax refundable is reduced) for an unrecognized tax benefit because it represents an enterprise’s potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provisions of ASC 740-10. Interest costs and related penalties related to unrecognized tax benefits are required to be calculated, if applicable. The Company’s policy is to classify assessments, if any, for tax related interest as interest expense and penalties as selling, distribution, and administrative expenses ("SD&A"). As of April 3, 2022 and January 2, 2022, no liability for unrecognized tax benefits was required to be reported. The Company does not expect any significant changes in its unrecognized tax benefits in the next fiscal year.
Goodwill and Other Identifiable Intangible Assets – The Company allocates the cost of acquired companies to the identifiable tangible and intangible assets acquired and liabilities assumed, with the remaining amount classified as goodwill. The identification and valuation of these intangible assets and the determination of the estimated useful lives at the time of acquisition, as well as the completion of impairment tests, require significant management judgments and estimates. These estimates are made based on, among other factors, review of projected future operating results and business plans, economic projections, anticipated highest and best use of future cash flows and the cost of capital. The use of alternative estimates and assumptions could increase or decrease the estimated fair value of goodwill and other intangible assets, and potentially result in a different impact to the Company’s results of operations. Further, changes in business strategy and/or market conditions may significantly impact these judgments and thereby impact the fair value of these assets, which could result in an impairment of the goodwill or intangible assets.
Finite-lived intangible assets consist of distribution/customer relationships, technology, certain master distribution rights and certain trademarks. These assets are being amortized over their estimated useful lives. Finite-lived intangible assets are tested for impairment only when management has determined that potential impairment indicators are present.
Goodwill and other indefinite-lived intangible assets (including certain trade names, certain master distribution rights and company-owned sales routes) are not amortized but are tested for impairment at least annually and whenever events or circumstances change that indicate impairment may have occurred. The Company tests goodwill for impairment at the reporting unit level. The Company has identified the existing snack food operations as its sole reporting unit.
As the Company has early adopted the FASB Accounting Standards Update ("ASU") No. 2017-04, Intangibles - Goodwill and Other ("Topic 350"): Simplifying the Test for Goodwill Impairment, the Company is required to record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value.
6


ASU No. 2017-04, Topic 350, also permits an entity to first assess qualitative factors to determine whether it is necessary to perform quantitative impairment tests for goodwill and indefinite-lived intangibles. If an entity believes, as a result of each qualitative assessment, it is more likely than not that the fair value of goodwill or an indefinite-lived intangible asset exceeds its carrying value then a quantitative impairment test is not required.
For the latest qualitative analysis performed, which took place on the first day of the fourth quarter of 2021, we had taken into consideration all the events and circumstances listed in FASB ASC 350, Intangibles—Goodwill and Other, in addition to other entity-specific factors that had taken place. We have determined that there was no significant impact that affected the fair value of the reporting unit through April 3, 2022. Therefore, we have determined that it was not necessary to perform a quantitative goodwill impairment test for the reporting unit.

Fair Value of Financial Instruments – Financial instruments held by the Company include cash and cash equivalents, accounts receivable, hedging instruments, purchase commitments on commodities, accounts payable and debt. The carrying value of all cash and cash equivalents, accounts receivable and accounts payable approximate their fair value due to their short-term nature. The carrying value of the debt is also estimated to approximate its fair value based upon current market conditions and interest rates. The fair value of the hedging instruments are revalued at each reporting period.
Revenue Recognition – The Company’s revenues primarily consist of the sale of salty snack items to customers, including supermarkets, mass merchants, club stores, dollar and discount stores, convenience stores, independent grocery stores, drug stores, food service, vending, military, and other channels. The Company sells its products in most regions of the United States primarily through its DSD network, direct to warehouse shipments, and third-party distributors. These revenue contracts generally have a single performance obligation. Revenue, which includes shipping and handling charges billed to the customer, is reported net of variable consideration and consideration payable to customers, including applicable discounts, returns, allowances, trade promotion, consumer coupon redemption, unsaleable product, and other costs. Amounts billed and due from customers are classified as accounts receivables and require payment on a short-term basis and, therefore, the Company does not have any significant financing components.

The Company recognizes revenue when (or as) performance obligations are satisfied by transferring control of the goods to customers. Control is transferred upon delivery of the goods to the customer. Shipping and/or handling costs that occur before the customer obtains control of the goods are deemed to be fulfillment activities and are accounted for as fulfillment costs. Applicable shipping and handling are included in customer billing and are recorded as revenue as the products’ control is transferred to customers. The Company assesses the goods promised in customer purchase orders and identifies a performance obligation for each promise to transfer a good that is distinct.
The Company offers various forms of trade promotions and the methodologies for determining these provisions are dependent on local customer pricing and promotional practices, which range from contractually fixed percentage price reductions to provisions based on actual occurrence or performance. The Company’s promotional activities are conducted either through the retail trade or directly with consumers and include activities such as in store displays and events, feature price discounts, consumer coupons, and loyalty programs. The costs of these activities are recognized at the time the related revenue is recorded, which normally precedes the actual cash expenditure. The recognition of these costs therefore requires management judgment regarding the volume of promotional offers that will be redeemed by either the retail trade customer or consumer. These estimates are made using various techniques including historical data on performance of similar promotional programs. The Company has reserves in place of $26.3 million as of April 3, 2022 and $26.5 million as of January 2, 2022. Differences between estimated expense and actual redemptions are recognized as a change in management estimate as actual redemptions are incurred.
Business Combinations – The Company evaluates acquisitions of assets and other similar transactions to assess whether or not the transaction should be accounted for as a business combination or asset acquisition by first applying a screen test to determine if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If the screen is met, the transaction is accounted for as an asset acquisition. If the screen is not met, further determination is required as to whether or not the Company has acquired inputs and processes that have the ability to create outputs which would meet the definition of a business. Significant judgment is required in the application of the screen test to determine whether an acquisition is a business combination or an acquisition of assets.
The Company uses the acquisition method of accounting for acquired businesses. Under the acquisition method, the Company’s financial statements reflect the operations of an acquired business starting from the completion of the acquisition. The assets acquired and liabilities assumed are recorded at their respective estimated fair values at the date of the acquisition. Any excess of the purchase price over the estimated fair values of the identifiable net assets acquired is recorded as goodwill.
7


Distributor Buyouts - During the first fiscal quarter of 2022, we bought out and terminated the contracts of multiple third-party distributors who had previously been providing services to the Company. These transactions were accounted for as contract terminations and resulted in expense of $23.0 million for thirteen weeks ended April 3, 2022, and are included within selling and distribution expense on the consolidated statement of operations and comprehensive loss.
Use of Estimates – Management uses estimates and assumptions in preparing the consolidated financial statements in accordance with U.S. GAAP. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Some examples, but not a comprehensive list, include sales and promotional allowances, customer returns, allowances for doubtful accounts, inventory valuations, useful lives of fixed assets and related impairment, long-term investments, hedge transactions, goodwill and intangible asset valuations and impairments, incentive compensation, income taxes, self-insurance, contingencies, litigation, and inputs used to calculate deferred tax liabilities, tax valuation allowances, and tax receivable agreements. Actual results could vary materially from the estimates that were used.
Recently Issued Accounting Standards – In December 2019, the FASB issued "ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes" ("Topic 740"). This Accounting Standards Update ("ASU") is intended to simplify various aspects related to accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarifying certain aspects of the current guidance to promote consistency among reporting entities. For public business entities, ASU 2019-12 was effective for annual periods beginning after December 15, 2020 and interim periods within those annual periods, with early adoption permitted. We adopted this standard upon the loss of our emerging growth status as of January 2, 2022. Adoption of the new standard did not have a material impact on our consolidated financial statements.

In March 2020, the FASB issued "ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting". This ASU provides practical expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The expedients and exceptions provided by the amendments in this update apply only to contracts, hedging relationships, and other transactions that reference the London interbank offered rate ("LIBOR") or another reference rate expected to be discontinued as a result of reference rate reform. ASU No. 2020-04 is elective and effective as of March 12, 2020 through December 31, 2022. Once elected, this ASU must be applied prospectively for all eligible contract modifications. The Company will adopt this guidance when relevant contracts are modified upon transition to alternative reference rates. The Company is currently evaluating the impact of the new standard on the Company’s consolidated financial statements and related disclosures.

In June 2016, ASU No. 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments ("Topic 326") was issued. This ASU requires entities to measure the impairment of certain financial instruments, including accounts receivables, based on expected losses rather than incurred losses. This ASU is effective for the Company for fiscal years beginning after December 15, 2022, with early adoption permitted, and will be effective for the Company beginning in 2023. The Company is currently evaluating the impact of the new standard on the Company’s consolidated financial statements and related disclosures.
2.ACQUISITIONS
Vitner's

On January 11, 2021, the Company announced that its subsidiary, UQF, entered into a definitive agreement with Snak-King Corp. to acquire certain assets of the C.J. Vitner business ("Vitner's acquisition" or "acquisition of Vitner's"), a leading brand of salty snacks in the Chicago, IL area. The Company closed this transaction on February 8, 2021 and the purchase price of approximately $25.2 million was funded from current cash-on-hand. The provisional fair values to which the purchase price was allocated were $2.9 million to trademarks, $0.8 million to customer relationships, $1.7 million to DSD routes, $1.9 million of other net assets, and $17.9 million to goodwill. The trademarks and customer relationships are being amortized over a period of 15 years. As of February 8, 2022, the purchase price allocation had been finalized.

Festida Foods

On May 11, 2021, the Company announced that its subsidiary, UQF, entered into a definitive agreement with Great Lakes Festida Holdings, Inc. to acquire all assets including real estate located in Grand Rapids, Michigan related to the operations of Festida Foods ("Festida Foods acquisition" or "acquisition of Festida Foods"), a manufacturer of tortilla chips, corn chips, and pellet snacks, and the largest manufacturer of tortilla chips for the Company's ON THE BORDER® brand. The Company closed this transaction on June 7, 2021 and the purchase price of approximately $40.3 million was funded in part from incremental financing on an existing term loan.
8



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

(in thousands)
Purchase consideration$40,324 
Assets acquired:
Accounts receivable2,776 
Inventory2,704 
Prepaid expenses and other assets182 
Property, plant and equipment24,650 
Customer relationships1,270 
Total assets acquired:31,582 
Liabilities assumed:
Accounts payable2,017 
Accrued expenses844 
Total liabilities assumed:2,861 
Net identifiable assets acquired28,721 
Goodwill$11,603 

The customer relationships are being amortized over a period of 10 years. As of April 3, 2022, the purchase price allocation has not been finalized. We expect to finalize the valuation report and complete the purchase price allocation no later than one-year from the acquisition date.

RW Garcia

On November 2, 2021, the Company announced that its subsidiaries, entered into a definitive agreement to acquire the equity of R.W. Garcia Holdings, LLC and its' wholly-owned subsidiary R.W. Garcia Co., Inc. ("RW Garcia"), an artisan maker of high-quality organic tortilla chips, crackers, and corn chips ("RW Garcia acquisition"). The Company closed on this transaction on December 6, 2021, and the cash purchase price of approximately $57.8 million funded in part from a draw on the Company's line of credit and cash on hand. In addition to this acquisition on December 6, 2021, the Company closed on an acquisition of a manufacturing facility of which RW Garcia was a tenant. The cost of the manufacturing facility was approximately $6.0 million .

9


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

(in thousands)
Purchase consideration$56,430 
Tax consideration1,414 
Total consideration57,844 
Assets acquired:
Cash5,401 
Accounts receivable4,660 
Inventory5,674 
Prepaid expenses and other assets2,105 
Property, plant and equipment20,210 
Trade name3,100 
Customer relationships4,720 
Total assets acquired:45,870 
Liabilities assumed:
Accounts payable6,017 
Accrued expenses1,838 
Deferred tax liability6,140 
Total liabilities assumed:13,995 
Net identifiable assets acquired31,875 
Goodwill$25,969 

The trade name and customer relationships are being amortized over a period of 15 years. As of April 3, 2022, the purchase price allocation has not been finalized. We expect to finalize the valuation report and complete the purchase price allocation no later than one-year from the acquisition date.

3.INVENTORIES
Inventories consisted of the following:
(in thousands)
As of
April 3, 2022
As of January 2, 2022
Finished goods$53,166 $43,533 
Raw materials33,599 29,428 
Maintenance parts7,013 6,556 
Total inventories$93,778 $79,517 
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4.PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net, consisted of the following:
(in thousands)
As of
April 3, 2022
As of January 2, 2022
Land$25,750 $25,886 
Buildings98,675 98,664 
Machinery and equipment214,972 214,319 
Land improvements3,443 3,393 
Building improvements3,288 3,048 
Construction-in-progress19,104 13,745 
 365,232 359,055 
Less: accumulated depreciation(66,576)(55,248)
Property, plant and equipment, net$298,656 $303,807 
Depreciation expense was $12.4 million and $9.9 million for the thirteen weeks ended April 3, 2022 and April 4, 2021, respectively. Depreciation expense is classified in cost of goods sold, selling, distribution, and administrative expenses on the consolidated statements of operations and comprehensive loss.
5.GOODWILL AND INTANGIBLE ASSETS, NET
A rollforward of goodwill is as follows:
(in thousands)
January 2, 2022$915,438 
RW Garcia acquisition adjustment52 
Balance as of April 3, 2022$915,490 
For the first fiscal quarter of 2022, the change to goodwill was attributable to the RW Garcia acquisition adjustment.
Intangible assets, net, consisted of the following:
(in thousands)
As of
April 3, 2022
As of January 2, 2022
Subject to amortization:  
Distributor/customer relationships$677,930 $677,930 
Technology 43 
Trademarks63,850 63,850 
Master distribution rights 2,221 
Amortizable assets, gross741,780 744,044 
Accumulated amortization(54,401)(45,224)
Amortizable assets, net687,379 698,820 
Not subject to amortization:
Trade names434,513 434,513 
Route assets8,316 9,176 
Intangible assets, net$1,130,208 $1,142,509 
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Previously, we were granted certain exclusive distribution rights for certain products manufactured by another manufacturer. During the first fiscal quarter of 2022 we shifted our relationship with that manufacturer and worked with them to help convert that shelf space to Company-branded products. As a result, we recorded impairment expense of $2.0 million and the amortizable master distribution rights decreased by $2.2 million. There were no other significant changes to intangible assets during the thirteen weeks ended April 3, 2022 other than those which arise from the normal course of business of buying and selling of Company owned route assets and amortization.
Amortization of the distributor/customer relationships, technology, and trade names amounted to $9.4 million and $9.5 million for the thirteen weeks ended April 3, 2022 and April 4, 2021, respectively. Amortization expense is classified in administrative expenses on the consolidated statements of operations and comprehensive loss.
6.NOTES RECEIVABLE
The Company has undertaken a program in recent years to sell company-managed DSD distribution routes to IOs. Contracts are executed between the Company and the IO for the sale of the product distribution route, including a note in favor of the Company, in certain cases. The notes bear interest at rates ranging from 0.00% to 8.55% with terms ranging generally from one to ten years. The notes receivable balances due from IOs at April 3, 2022 and January 2, 2022 totaled $25.8 million and $27.2 million, respectively, and are collateralized by the routes for which the loans are made. Of the balance at April 3, 2022 and January 2, 2022, $22.9 million and $24.8 million, respectively relates to corresponding notes payable, as discussed in further detail within Note 8. "Long-Term Debt".
Other notes receivable totaled $0.2 million and $0.2 million as of April 3, 2022 and January 2, 2022, respectively.
7.ACCRUED EXPENSES AND OTHER
Current accrued expenses and other consisted of the following:
(in thousands)As of April 3, 2022January 2, 2022
Accrued compensation and benefits$15,183 $20,081 
Right-of-use liability10,742 9,152 
Accrued freight and manufacturing related costs8,817 8,928 
Insurance liabilities7,779 8,620 
Acquisition tax consideration1,594 5,660 
Accrued interest494 371 
Short term interest rate hedge liability150 4,548 
Accrued dividends 4,189 
Accrued sales tax 1,300 
Other accrued expenses8,597 8,431 
Total accrued expenses and other$53,356 $71,280 
Non-current accrued expenses and other consisted of the following:
(in thousands)As of April 3, 2022As of January 2, 2022
Right-of-use liability$24,445 $23,226 
Tax Receivable Agreement liability
24,336 24,443 
Supplemental retirement and salary continuation plans7,245 8,117 
Other long term accrued expenses83 52 
Total accrued expenses and other$56,109 $55,838 
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8.LONG-TERM DEBT
Revolving Credit Facility
On November 21, 2017, UBH entered into an asset based revolving credit facility (as amended, the "ABL facility"), pursuant to the terms of that certain First Lien Term Loan Credit Agreement, dated November 21, 2017 (the "Credit Agreement"). On April 1, 2020, the ABL facility was amended to increase the credit limit up to $116.0 million and to extend the maturity through August 22, 2024. On December 18, 2020, the ABL facility was amended to increase the credit limit up to $161.0 million. As of April 3, 2022 and January 2, 2022, $56.0 million and $36.0 million, respectively, were outstanding under this facility. Availability under the ABL facility is based on a monthly accounts receivable and inventory borrowing base certification, which is net of outstanding letters of credit. As of April 3, 2022 and January 2, 2022, $80.8 million and $96.9 million, respectively, was available for borrowing, net of letters of credit. The facility bears interest at an annual rate based on LIBOR plus an applicable margin of 1.50% (ranging from 1.50% to 2.00% based on availability) or the prime rate plus an applicable margin of 0.50% (ranging from 0.50% to 1.00%). Had the Company elected to use the Prime rate, the interest rate on the facility as of April 3, 2022 and April 4, 2021, would have been 3.75%. The Company elected to use the LIBOR rate, the interest rate on the ABL facility as of April 3, 2022 was 1.95%. The Company elected to use the LIBOR rate as of April 4, 2021 and the interest rate was 1.61%. The ABL facility is also subject to unused line fees (0.5% at April 3, 2022) and other fees and expenses.
Standby letters of credit in the amount of $10.3 million have been issued as of April 3, 2022 and January 2, 2022. The standby letters of credit are primarily issued for insurance purposes.
Term Loans
On December 14, 2020, the Company entered into a Bridge Credit Agreement with a syndicate of banks, led by Bank of America, N.A. (the "Bridge Credit Agreement"). The proceeds of the Bridge Credit Agreement were used to fund the Company’s acquisition of Truco and the IP Purchase from OTB Acquisition, LLC, in which the Company withdrew $490.0 million to finance the Truco Holdco Inc. ("Truco" and such acquisition, the "Truco Acquisition") and purchase and acquisition of certain intellectual property from OTB Acquisition, LLC (the "IP Purchase"),. The Bridge Credit Agreement bears interest at an annual rate based on 4.25% Base plus 1 month LIBOR with scheduled incremental increases to the base rate, as defined in the Bridge Credit Agreement. The loan converts into an Extended Term Loan if the Loan remains open 365 days after the closing date. As of January 3, 2021, the outstanding balance of the Bridge Credit Agreement was $370.0 million, with $120.0 million being repaid from the redemption of the Company's warrants. Commitment fees and deferred financing costs on the Bridge Credit Agreement totaled $7.2 million, of which $2.6 million was expended in the thirteen weeks ended April 4, 2021. In connection with Amendment No. 2 to the Credit Agreement, and a $12.0 million repayment in the first quarter of 2021, the outstanding balance of $370.0 million was repaid in full.
On January 20, 2021, the Company entered into Amendment No. 2 to the Credit Agreement ("Amendment No. 2") which provided additional operating flexibility and revisions to certain restrictive covenants. Pursuant to the terms of Amendment No. 2, the Company raised $720 million in aggregate principal of Term Loan B ("Term Loan B") which bears interest at LIBOR plus 3.00%, and extended the maturity of the Credit Agreement to January 20, 2028. The proceeds were used, together with cash on hand and proceeds from our exercised warrants, to redeem the outstanding principal amount of existing Term Loan B and Bridge Credit Agreement of $410 million and $358 million, respectively. The refinancing was accounted for as an extinguishment. The Company incurred debt issuance costs and original issuance discounts of $8.4 million.
On June 22, 2021, the Company entered into Amendment No. 3 to the Credit Agreement ("Amendment No. 3"). Pursuant to the terms of Amendment No. 3, the Company increased the principal balance of Term Loan B by $75.0 million to bring the aggregated balance of Term Loan B proceeds to $795.0 million. The Company incurred additional debt issuance costs and original issuance discounts of $0.7 million related to the incremental funding.
The First Lien Term Loan, the Secured First Lien Note, Term Loan B, and the ABL facility are collateralized by substantially all of the assets and liabilities of the Company. The credit agreements contain certain affirmative and negative covenants as to operations and the financial condition of the Company. The Company was in compliance with its financial covenant as of April 3, 2022.
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Debt (in thousands)
Issue DatePrincipal BalanceInterest RateMaturity DateApril 3, 2022January 2, 2022
Term loan BJune-21$795,000 3.21 %January-28$785,248 $787,236 
Equipment loans30,476 26,655 
Revolving credit facility56,000 36,000 
Net impact of debt issuance costs and original issue discounts(7,588)(7,929)
Total long-term debt864,136 841,962 
Less: current portion(11,414)(11,414)
Long term portion of term debt and financing obligations$852,722 $830,548 
Other Notes Payable and Capital Leases
During the first fiscal quarter of 2022, we 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 resulted in expense of $23.0 million for the thirteen weeks ended April 3, 2022. As a condition of our buyout of distributors an additional $4.1 million is expected to be paid out and is included in other in the table below.
During the third quarter of 2021, the Company recorded liabilities related primarily to reclaiming distribution rights from distributors, of which $1.3 million was outstanding as of April 3, 2022 and January 2, 2022, respectively.
During the first fiscal quarter of 2020, the Company purchased intellectual property that include a deferred purchase price of $0.5 million, of which $0.3 million is outstanding as of April 3, 2022 and January 2, 2022, respectively.
Amounts outstanding under notes payable consisted of the following:
(in thousands)
As of
April 3, 2022
As of January 2, 2022
Note payable – IO notes$22,387 $24,822
Capital lease8,229 8,166
Other5,570 1,678
Total notes payable36,186 34,666
Less: current portion(13,057)(9,957)
Long term portion of notes payable$23,129 $24,709
During fiscal 2019, the Company sold $33.2 million of notes receivable from IOs on its books for $34.1 million in a series of transactions to a financial institution. During fiscal 2021, the Company sold an additional $11.8 million of notes receivable from IOs on its books for $12.5 million in a series of transactions to a financial institution. Due to the structure of the transactions, they did not qualify for sale accounting treatment and the Company has recorded the notes payable obligation owed by the IOs to the financial institution on its books; the corresponding notes receivable also remained on the Company’s books. The Company services the loans for the financial institution by collecting principal and interest from the IOs and passing it through to the institution. The underlying notes have various maturity dates through March 2032. The Company partially guarantees the outstanding loans, as discussed in further detail within Note 11. "Contingencies". 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.

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Interest Expense
Interest expense consisted of the following:
(in thousands)Thirteen weeks ended April 3, 2022Thirteen weeks ended April 4, 2021
Company’s ABL facility and other long-term debt$8,331 $7,574 
Amortization of deferred financing fees341 2,870 
IO loans431 417 
Total interest$9,103 $10,861 
9.DERIVATIVE FINANCIAL INSTRUMENTS AND PURCHASE COMMITMENTS
Derivative Financial Instruments
To reduce the effect of interest rate fluctuations, the Company entered into a three year interest rate swap contract on September 6, 2019, with an effective date of September 30, 2019, with a counter party to make a series of payments based on a fixed interest rate of 1.339% and receive a series of payments based on the greater of LIBOR or 0.00%. Both the fixed and floating payment streams are based on a notional amount of $250 million. On December 21, 2021, with an effective date of December 31, 2021, the Company entered into an accreting interest rate swap contract with a counter party to make a series of payments based on a fixed interest rate of 1.3885% and receive a series of payments based on the greater of LIBOR or 0.00%. Both the fixed and floating payment streams are based on a notional amount of $250 million, accreting to $500 million and maturing on September 30, 2026. The Company entered into this transaction to reduce its exposure to changes in cash flows associated with its variable rate debt and has designated this derivative as a cash flow hedge. At April 3, 2022, the effective fixed interest rate on the long-term debt hedged by these contracts was 3.94%. For further treatment of the Company’s interest rate swap, refer to "Note 10. Fair Value Measurements" and "Note 12. Accumulated Other Comprehensive Income."
Warrant Liabilities
The Company has outstanding warrants which are accounted for as derivative liabilities pursuant to ASC 815-40. See Note 15. "Warrants" for additional information on our warrant liabilities. A reconciliation of the changes in the warrant liability during the thirteen weeks ended April 3, 2022 is as follows:

(in thousands)
Fair value of warrant liabilities as of January 2, 2022$46,224 
Gain on remeasurement of warrant liability(1,944)
Fair value of warrant liabilities as of April 3, 2022$44,280 

Purchase Commitments
The Company has outstanding purchase commitments for specific quantities at fixed prices for certain key ingredients to economically hedge commodity input prices. These purchase commitments totaled $46.3 million as of April 3, 2022. The Company accrues for losses on firm purchase commitments in a loss position at the end of each reporting period to the extent that there is an active observable market. The Company has recorded purchase commitment losses totaling $0.0 million for the thirteen weeks ended April 3, 2022 and April 4, 2021.
10.FAIR VALUE MEASUREMENTS
The Company follows the guidance relating to fair value measurements and disclosures with respect to financial assets and liabilities that are re-measured and reported at fair value each reporting period, and with respect to non-financial assets and liabilities that are not required to be measured at fair value on a recurring basis. The guidance establishes a fair value hierarchy that prioritizes the inputs to the valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level I) and the lowest priority to unobservable pricing inputs (Level III). A financial asset or liability’s level within the fair value hierarchy is based upon the lowest level of any input that is significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are described below:
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Level I - Valuations are based on unadjusted quoted prices in active markets for identical, unrestricted assets or liabilities;
Level II - Valuations are based on quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active. Financial asset or liabilities which are included in this category are securities where all significant inputs are observable, either directly or indirectly; and
Level III - Prices or valuations that are unobservable and where there is little, if any, market activity for these financial assets or liabilities. The inputs into the determination of fair value inputs for these investments require significant management judgment or estimation. The availability of observable inputs can vary depending on the financial asset or liability and is affected by a wide variety of factors. To the extent that valuation is based on inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment.
The fair values of the Company’s Level 2 derivative instruments were determined using valuation models that use market observable inputs including interest rate curves and both forward and spot prices for commodities. Derivative assets and liabilities included in Level 2 primarily represent commodity and interest rate swap contracts.
The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis based upon the level within the fair value hierarchy in which the fair value measurements fall, as of April 3, 2022:
(in thousands)Level ILevel IILevel IIITotal
Assets:
Cash and cash equivalents$14,899 $ $ $14,899 
Interest rate swaps 25,593  25,593 
Total assets$14,899 $25,593 $ $40,492 
Liabilities
Commodity contracts$ $54 $ $54 
Interest rate swaps 174  174 
Private placement warrants 44,280  44,280 
Debt 864,136  864,136 
Total liabilities$ $908,644 $ $908,644 
The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis based upon the level within the fair value hierarchy in which the fair value measurements fall, as of January 2, 2022: 
(in thousands)Level ILevel IILevel IIITotal
Assets:
Cash and cash equivalents$41,898 $ $ $41,898 
Interest rate swaps 2,208  2,208 
Total assets$41,898 $2,208 $ $44,106 
Liabilities
Commodity contracts$ $54 $ $54 
Interest rate swaps 4,600  4,600 
Private placement warrants 46,224  46,224 
Debt 841,962  841,962 
Total liabilities$ $892,840 $ $892,840 
11.CONTINGENCIES
Litigation Matters
The Company is involved in litigation and other matters incidental to the conduct of its business, the results of which, in the opinion of management, are not likely to be material to the Company’s financial condition, results of operations or cash flows.
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Tax Matters
The Company received an assessment from the Commonwealth of Pennsylvania pursuant to a sales and use tax audit for the period from January 1, 2014 through December 31, 2016. As of January 2, 2022, the Company had a reserve of $1.3 million to cover the assessment. On January 7, 2022, the Company settled the audit with the Commonwealth of Pennsylvania for $0.9 million.
Guarantees
The Company partially guarantees loans made to IOs by Cadence Bank for the purchase of routes. The outstanding balance of loans guaranteed was $2.0 million and $2.2 million at April 3, 2022 and January 2, 2022, respectively, all of which was recorded by the Company as an off balance sheet arrangement. The maximum amount of future payments the Company could be required to make under the guarantees equates to 25% of the outstanding loan balance up to $2.0 million. 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.
The Company partially guarantees loans made to IOs by Bank of America for the purchase of routes. The outstanding balance of loans guaranteed that were issued by Bank of America was $22.2 million and $18.6 million at April 3, 2022 and January 2, 2022, respectively, which are off balance sheet. As discussed in Note 8. "Long-Term Debt", the Company also sold notes receivable on its books to Bank of America during fiscal 2019 and fiscal 2021, which the Company partially guarantees. The outstanding balance of notes purchased by Bank of America at April 3, 2022 and January 2, 2022 was $18.5 million and $19.7 million, respectively. Due to the structure of the transactions, the sale did not qualify for sale accounting treatment, as such the Company records the notes payable obligation owed by the IOs to the financial institution on its Consolidated Balance Sheets; the corresponding note receivable also remained on the Company’s Consolidated Balance Sheets. The maximum amount of future payments the Company could be required to make under these guarantees equates to 25% of the outstanding loan balance on the first day of each calendar year plus 25% of the amount of any new loans issued during such calendar year. 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.
The Company guarantees loans made to IOs by M&T Bank for the purchase of routes. The agreement with M&T Bank was amended in January 2020 so that the Company guaranteed up to 25% of the greater of the aggregate principal amount of loans outstanding on the payment date or January 1st of the subject year. The outstanding balance of loans guaranteed was $4.4 million and $4.9 million at April 3, 2022 and January 2, 2022, respectively, all of which were included included in the Company's consolidated balance sheets. 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.
12.ACCUMULATED OTHER COMPREHENSIVE INCOME
Total accumulated other comprehensive income was $31.5 million as of April 3, 2022 and $3.7 million as of January 2, 2022. Total accumulated other comprehensive income consists solely of unrealized gains from the Company’s derivative financial instruments accounted for as cash flow hedges.
Changes to the balance in accumulated other comprehensive income were as follows:
(in thousands)Gain on
Cash Flow Hedges
Balance as of January 3, 2021$924 
Unrealized gain on cash flow hedges822 
Balance as of April 4, 2021$1,746 
Balance as of January 2, 2022$3,715 
Unrealized gain on cash flow hedges27,809 
Balance as of April 3, 2022$31,524 

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13.SUPPLEMENTARY CASH FLOW INFORMATION
(in thousands)Thirteen weeks ended April 3, 2022Thirteen weeks ended April 4, 2021
Cash paid for interest$9,627 $9,787 
Refunds related to income taxes$4,075 $182 
Payments for income taxes$107 $ 
Dividends paid$4,189 $4,261 
14.INCOME TAXES
The Company is subject to federal and state income taxes with respect to our allocable share of any taxable income or loss of UBH, as well as any standalone income or loss the Company generates. UBH is treated as a partnership for federal income tax purposes, and for most applicable state and local income tax purposes, and generally does not pay income taxes in most jurisdictions. Instead, UBH taxable income or loss is passed through to its members, including the Company. Despite its partnership treatment, UBH is liable for income taxes in those states not recognizing its pass-through status and for certain of its subsidiaries not taxed as pass-through entities. The Company has acquired various domestic entities taxed as corporations, which are now wholly-owned by us or our subsidiaries. Where required or allowed, these subsidiaries also file and pay tax as a consolidated group for federal and state income tax purposes. The Company anticipates this structure to remain in existence for the foreseeable future.

The Company recorded income tax expense of $2.8 million and $1.0 million for the thirteen weeks ended April 3, 2022 and April 4, 2021, respectively. The effective tax rates for the thirteen weeks ended April 3, 2022 and April 4, 2021 were (9.5)% and (4.5)%, respectively. The Company’s effective tax rates differ from the federal statutory rate of 21% primarily due to the impact of UBH, which is a partnership, is not taxed at the Company level, and is required to allocate some of its taxable results to the Continuing Members, as well as state taxes and the fair value impact of warrant liabilities. The Company’s effective tax rate for the thirteen weeks ended April 3, 2022 is (7.2)% before consideration of any discrete items. During the thirteen weeks ended April 3, 2022, the effective tax rate was impacted by statutory state tax rate changes which resulted in a discrete tax expense of $0.5 million.

The Company regularly evaluates valuation allowances established for deferred tax assets ("DTA's") for which future realization is uncertain. The Company assessed the available positive and negative evidence to estimate whether future taxable income would be generated to permit use of the existing DTA's. As of April 3, 2022, a significant piece of objective negative evidence evaluated was the twelve-quarter cumulative loss before taxes. Such objective evidence limits the ability to consider other subjective evidence, such as projections for future growth. The Company determined that there is uncertainty regarding the utilization of certain DTA's such as the investment in Utz Brands Holdings, LLC, federal operating losses subject to annual limitations due to "change in ownership" provisions, and state net operating losses where the Company does not expect to continue to have nexus. Therefore, a valuation allowance has been recorded against the DTA's for which it is more-likely-than-not they will not be realized. The Company has DTA’s related to its investment in partnership that are expected to be realized in the ordinary course of operations or generate future net operating losses for which a portion will have an indefinite carryforward period. Additionally, the Company has deferred tax liabilities ("DTL’s") related to its investment in the partnership that will not reverse in the ordinary course of business and will only reverse when the partnership is sold or liquidated. The Company has no intention of disposing of or liquidating the partnership and therefore has not considered the indefinite lived DTL as a source of income to offset other DTA’s. In weighing positive and negative evidence, both objective and subjective, including its twelve-quarter cumulative loss, the Company has recorded a valuation allowance against its DTA’s related to net operating losses and deductible book/tax differences and recorded a DTL primarily related to the book over tax basis in the investment in the partnership that will not reverse in the ordinary course of operations. The Company considered that an indefinite lived DTL may be considered as a source of taxable income for an indefinite lived DTA; however, given our indefinite lived DTL will only reverse upon sale or liquidation, the Company determined that it was more appropriate to record a valuation allowance against its DTA’s. The amount of DTA considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as projections for growth.

As of April 3, 2022, tax years 2018 through 2022 remain open and subject to examination by the Internal Revenue Service and the majority of the states where the Company has nexus, and tax years 2017 through 2022 remain open and subject to examination in selected states that have a longer statute of limitations.

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Upon audit, tax authorities may challenge all or part of a tax position. A tax position successfully challenged by a taxing authority could result in an adjustment to our provision for income taxes in the period in which a final determination is made. The Company did not maintain any unrecognized tax benefits as of April 3, 2022 and January 2, 2022.

Tax receivable agreement liability

Pursuant to an election under section 754 of the Internal Revenue Code, the Company obtained an increase in its share of the tax basis in the net assets of UBH when it was deemed to purchase UBH units from the third party members of UBH and purchased UBH units from the Continuing Members per the Business Combination. The Continuing Members have the option to exchange UBH units for UBI common stock post-Business Combination. The Company intends to treat any such exchanges as direct purchases for U.S. federal income tax purposes, which is expected to further increase its share of the tax basis in the net assets of UBH. The increases in tax basis may reduce the amounts the Company would otherwise pay in the future to various tax authorities. They may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.

Pursuant to the Business Combination Agreement, the Company entered into the Tax Receivable Agreement in connection with the Business Combination (the "Tax Receivable Agreement" or "TRA") , which provides for the payment by the Company of 85% of the amount of any tax benefits realized as a result of (i) increases in the share of the tax basis in the net assets of UBH resulting from the Business Combination and any future exchanges by the Continuing Members of UBH units for UBI common stock; (ii) tax basis increases attributable to payments made under the TRA; and (iii) tax amortization deductions attributable to the acquisition of Kennedy Endeavors, LLC and the election to treat the transaction as an asset deal for tax purposes (the "TRA Payments"). The rights of each party under the TRA other than the Company are assignable, subject to certain restrictions. The timing and amount of aggregate payments due under the TRA may vary based on a number of factors, including the timing and amount of taxable income generated by the Company each year, as well as the tax rate then applicable, among other factors.

As of April 3, 2022 and January 2, 2022, the Company had a liability of $24.5 million and $24.6 million, respectively, related to its projected obligations under the TRA, which is reflected as a non-current accrued expense in the consolidated balance sheet.

15.WARRANTS

Prior to the Business Combination, CCH issued 15,833,332 warrants that were initially sold by CCH in its initial public offering of securities (the "Public Warrants"), including 1,166,666 warrants issued pursuant to those certain Forward Purchase Agreements entered into by CCH, the Sponsor, and the independent directors of CCH (the "Forward Purchase Agreements") that were issued at the closing of the Business Combination as part of the Forward Purchase Agreement discussed below (the "Forward Purchase Warrants"), and 7,200,000 warrants initially sold to the Sponsor simultaneously with the closing of its initial public offering (the "Private Placement Warrants," collectively, with the Public Warrants and Forward Purchase Warrants, the "Warrants"). As a result of the Business Combination, the Company assumed the CCH warrants and such warrants are now exercisable for shares of UBI Class A Common Stock instead of Class A ordinary shares of CCH. All other features of the warrants remain unchanged. On December 14, 2020, the Company provided notice to the holders of the Public Warrants and Forward Purchase Warrants that their warrants would be redeemed in accordance with the original terms on January 14, 2021. As of April 3, 2022 and January 2, 2022, there were 7,200,000 Private Placement Warrants outstanding.

The Private Placement Warrants and the shares of Class A Common Stock issuable upon the exercise of the Private Placement Warrants were not transferable, assignable or salable until after the completion of the Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants are exercisable on a cashless basis, at the holder’s option, and are non-redeemable by the Company so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

We account for the Warrants as derivative liabilities in accordance with ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity ("ASC 815-40"), due to certain settlement provisions in the corresponding warrant agreement that do not meet the criteria to be classified in stockholders’ equity. Pursuant to ASC 815-40, the Warrants are now classified as a liability at fair value on the Company’s consolidated balance sheet, and the change in the fair value of such liability in each period is recognized as a non-cash gain or loss in the Company’s consolidated statements of operations and comprehensive loss. The Warrants are deemed equity instruments for income tax purposes, and accordingly, there is no tax accounting relating to changes in the fair value of the Warrants recognized.

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The remeasurement of the warrant liability resulted in a gain (loss) of $1.9 million and $(21.5) million for the thirteen weeks ended April 3, 2022 and April 4, 2021, respectively.

16.BUSINESS RISK
The novel coronavirus, or COVID-19, outbreak began impacting consumption, distribution and production of our products in March 2020. We have taken necessary preventive actions and implemented additional measures to protect our employees that work on site. We continue to experience higher demand for our products compared to historical volumes, and we are servicing that demand by increasing production and distribution activities. Generally, producers of food products, including salty snacks, have been deemed "essential industries" by federal, state, and local governments and are exempt from certain COVID-19-related restrictions on business operations. Our strategic manufacturing capabilities and DSD distribu