Utz Brands Inc

Previous wording

The following management's discussion and analysis of our financial condition and results of operations ("MD&A") should be read in conjunction with our unaudited interim consolidated financial statements as of and for the thirteen and twenty-six weeks ended June 30, 2024, together with our audited consolidated financial statements for our most recently completed fiscal year set forth under Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2023. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in Item 1A "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2023 and other filings under the Securities Exchange Act of 1934, as amended (the "Exchange Act").

Current wording

The following management's discussion and analysis of our financial condition and results of operations ("MD&A") should be read in conjunction with our unaudited interim consolidated financial statements as of and for the thirteen and thirty-nine weeks ended September 29, 2024, together with our audited consolidated financial statements for our most recently completed fiscal year set forth under Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2023. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in Item 1A "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2023 and other filings under the Securities Exchange Act of 1934, as amended (the "Exchange Act").

Previous wording

Our fiscal year end is the Sunday closest to December 31. Our fiscal year 2023 ended December 31, 2023 and was a fifty-two-week fiscal year, our fiscal year 2024 will end on December 29, 2024 and is a fifty-two-week fiscal year. Our fiscal quarters are comprised of thirteen weeks each, except for fifty-three-week fiscal years for which the fourth quarter is comprised of fourteen weeks, and ends on the thirteenth Sunday of each quarter (fourteenth Sunday of the fourth quarter, when applicable).

Current wording

Our fiscal year end is the Sunday closest to December 31. Our fiscal year 2023 ended December 31, 2023 and was a fifty-two-week fiscal year. Our fiscal year 2024 will end on December 29, 2024 and will also be a fifty-two-week fiscal year. Our fiscal quarters are comprised of thirteen weeks each, except for fifty-three-week fiscal years for which the fourth quarter is comprised of fourteen weeks, and end on the thirteenth Sunday of each quarter (or the fourteenth Sunday of the fourth quarter in fifty-three-week fiscal years).

Previous wording

Utz Brands Inc. (the “Company”) was founded in 1921 in Hanover, Pennsylvania and benefits from over 100 years of brand awareness and heritage in the salty snack industry. We are a leading United States manufacturer of branded salty snacks, producing a broad offering of salty snacks, including potato chips, tortilla chips, pretzels, cheese snacks, pork skins, pub/party mixes, and other snacks. Our iconic portfolio of authentic, craft, and “better-for-you” ("BFY") brands, includes Utz®, ON THE BORDER®, Zapp’s®, Golden Flake®, Boulder Canyon®, Hawaiian® Brand, and TORTIYAHS!®, among others, and enjoys strong household penetration in the United States, where our products can be found in approximately 49% of U.S. households as of December 31, 2023. As of June 30, 2024, we operate 8 primary manufacturing facilities across the United States with a broad range of capabilities, and are distributed nationally to grocery, mass merchant, club, convenience, drug and other retailers through direct shipments, distributors, and approximately 2,350 direct-store delivery ("DSD") routes. We have historically expanded our geographic reach and product portfolio organically and through acquisitions. Based on 2023 retail sales, we are the second-largest producer of branded salty snacks in our core geographies where we have acquired strong regional brands and distribution capabilities in recent years.

Current wording

We were founded in 1921 in Hanover, Pennsylvania and benefit from over 100 years of brand awareness and heritage in the salty snack industry. We are a leading United States manufacturer of branded salty snacks, producing a broad offering of salty snacks, including potato chips, tortilla chips, pretzels, cheese snacks, pork skins, pub/party mixes and other snacks. Our iconic portfolio of authentic, craft and “better-for-you” ("BFY") brands includes Utz®, On The Border®, Zapp’s®, Golden Flake®, Boulder Canyon®, Hawaiian® Brand and TORTIYAHS!®, among others, and enjoys strong household penetration in the United States, where our products can be found in approximately 49% of U.S. households as of December 31, 2023. As of September 29, 2024, we operate 8 primary manufacturing facilities across the United States with a broad range of capabilities, and are distributed nationally to grocery, mass merchant, club, convenience, drug and other retailers through direct shipments, distributors and approximately 2,450 direct-store delivery ("DSD") routes. We have historically expanded our geographic reach and product portfolio organically and through acquisitions. Based on 2023 retail sales, we are the second-largest producer of branded salty snacks in our collective core geographies of Alabama, Connecticut, Delaware, Louisiana, Maine, Maryland, Massachusetts, Mississippi, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Virginia, Vermont, West Virginia, and Washington,

Previous wording

Long-Term Demographics, Consumer Trends, and Demand – We participate in the attractive and growing $39 billion U.S. salty snacks category, within the broader approximately $129 billion market for U.S. snack foods as of June 30, 2024. For the thirteen weeks ended June 30, 2024, U.S. retail sales for salty snacks based on Circana data increased by 0.2% versus the comparable prior year period. Our retail sales increased 1.1% over the thirteen weeks ended June 30, 2024. A 2024 study from Circana cites that 46% of consumers snack three or more times a day, down three points compared to a year ago but with no change versus five years ago Additionally, the salty snacks category has historically benefited from favorable competitive dynamics, including low private label penetration and category leaders competing primarily through marketing and innovation. We expect these consumer trends to continue to drive consistent retail sales growth for salty snacks for the foreseeable future.

Current wording

Long-Term Demographics, Consumer Trends, and Demand – We participate in the attractive and growing $39 billion U.S. salty snacks category, within the broader approximately $129 billion market for U.S. snack foods as of September 29, 2024. For the thirteen weeks ended September 29, 2024, U.S. retail sales for salty snacks based on Circana data decreased by 0.4% versus the comparable prior year period. Our retail sales decreased 1.3% over the thirteen weeks ended September 29, 2024 versus the comparable prior year period. Within Potato Chips, our share performance was impacted by the softness in our Utz brand due to competitive activity, and in Zapp’s®, along with softness in our Golden Flake® business. Importantly, Boulder Canyon® gained share led by strong same store velocities in both traditional channels and in the natural channel, with growth of 26.5% and 37.3%, respectively, per Circana. A 2024 study from Circana cites that 46% of consumers snack three or more times a day, down three points compared to a year ago but with no change versus five years ago. Additionally, the salty snacks category has historically benefited from favorable competitive dynamics, including low private label penetration and category leaders competing primarily through marketing and innovation.

Previous wording

Competition – The salty snack industry is highly competitive and includes many diverse participants. Our products primarily compete with other salty snacks but also compete more broadly for certain eating occasions with other snack foods. We believe that the principal competitive factors in the salty snack industry include taste, convenience, product variety, product quality, price, nutrition, consumer brand awareness, media and promotional activities, in-store merchandising execution, customer service, cost-efficient distribution, and access to retailer shelf space. We believe we compete effectively with respect to each of these factors.

Current wording

Competition – The salty snack industry is highly competitive and includes many diverse participants. Our products primarily compete with other salty snacks but also compete more broadly for certain eating occasions with other snack foods. We believe that the principal competitive factors in the salty snack industry include taste, convenience, product variety, product quality, price, nutrition, consumer brand awareness, media and promotional activities, in-store merchandising execution, customer service, cost-efficient distribution and access to retailer shelf space. We believe we compete effectively with respect to each of these factors. Additionally, during 2024, certain competitors began to take certain discrete pricing actions in specific channels, resulting in an environment that has become far more promotional which has impacted our sales and promotional activities.

Previous wording

Financing Costs and Exposure to Interest Rate Changes – As of June 30, 2024, we had $736.4 million in variable rate indebtedness, down from $851.5 million at December 31, 2023. The decrease in variable rate debt is primarily due to a $141.0 million payment toward the outstanding balance of the Term Loan B and $17.7 million payment toward the outstanding balance of the loan by City National Bank which is secured by a majority of the real estate assets of our subsidiaries through September 2032 (the “Real Estate Term Loan”) made in connection with the Good Health and R.W. Garcia Sale (as defined below) and the Manufacturing Facilities Sale (as defined below) each as described in Note 2. Divestituresand Note 4. Property, Plant and Equipment, Net. As of June 30, 2024, our variable rate indebtedness is benchmarked to the Term SOFR Screen Rate ("SOFR”). As of June 30, 2024, we have existing interest rate swaps totaling $582.9 million of debt. Our interest rate hedge strategy has limited some of our exposure to changes in interest rates. We regularly evaluate our variable and fixed-rate debt. We continue to use low-cost, short- and long-term debt to finance our ongoing working capital, capital expenditures and other investments and dividends. Our weighted average interest rate for the twenty-six weeks ended June 30, 2024 was 5.8%, up from 5.7% during the twenty-six weeks ended July 2, 2023. We have used interest rate swaps to manage part of our exposure to interest rate changes, which can drive cash flow variability related to our debt. Refer to Note 8. Term Debt, Revolving Credit Facility, and Other Notes Payable and Note 9. Derivative Financial Instruments, Purchase Commitments, Warrants and Fair Value to our unaudited consolidated financial statements included under Part I, Item 1 of this filing for additional information on debt, derivative and purchase commitment activity. The Company has experienced the effect of increased interest rates on the portion of its debt that is not hedged and, continued rising interest rates could negatively impact our net income.

Current wording

Financing Costs and Exposure to Interest Rate Changes – As of September 29, 2024, we had $713.3 million in variable rate indebtedness, down from $851.9 million at December 31, 2023. The decrease in variable rate debt is primarily due to a $141.0 million payment made in connection with the Good Health and R.W. Garcia Sale (as defined below) and the Manufacturing Facilities Sale (as defined below), each as described in Note 2. Divestituresand Note 4. Property, Plant and Equipment, Net, toward the outstanding balance of the Term Loan B and $17.7 million payment toward the outstanding balance of the loan by City National Bank, which is secured by a majority of the real estate assets of our subsidiaries through September 2032 (the “Real Estate Term Loan”). As of September 29, 2024, our variable rate indebtedness is benchmarked to the Term SOFR Screen Rate. As of September 29, 2024, we have existing interest rate swaps totaling $582.0 million of debt. Our interest rate hedge strategy has limited some of our exposure to changes in interest rates. We regularly evaluate our variable and fixed-rate debt. We continue to use low-cost, short- and long-term debt to finance our ongoing working capital, capital expenditures and other investments and dividends. Our weighted average interest rate for the thirty-nine weeks ended September 29, 2024 was 5.7%, down from 5.8% during the thirty-nine weeks ended October 1, 2023. We have used interest rate swaps to manage part of our exposure to interest rate changes, which can drive cash flow variability related to our debt. Refer to Note 8. Term Debt, Revolving Credit Facility, and Other Notes Payable and Note 9. Derivative Financial Instruments, Purchase Commitments, Warrants and Fair Value, to our unaudited consolidated financial statements included under Part I, Item 1 of this filing for additional information on debt, derivative and purchase commitment activity. The Company has experienced the effect of increased interest rates on the portion of its debt that is not hedged, any and continued increases in interest rates could negatively impact our net income.

Previous wording

On February 5, 2024, the Company sold certain assets and brands to affiliates of Our Home™, an operating company of Better-for-You brands (“Our Home”). Under the agreement, affiliates of Our Home purchased the Good Health and R.W. Garcia brands, the Lincolnton, NC, and Lititz, PA manufacturing facilities and certain related assets, and assumed the Company’s Las Vegas, NV facility lease and manufacturing operations (the "Good Health and R.W. Garcia Sale") for $167.5 million, subject to customary adjustments. See Note 2. Divestitures for further discussion.

Current wording

On February 5, 2024, the Company sold certain assets and brands to affiliates of Our Home™, an operating company of Better-for-You brands (“Our Home”). Under the agreement, affiliates of Our Home purchased the Good Health and R.W. Garcia brands, the Lincolnton, NC and Lititz, PA manufacturing facilities and certain related assets, and assumed the Company’s Las Vegas, NV facility lease and manufacturing operations (the "Good Health and R.W. Garcia Sale"), for $167.5 million, subject to customary adjustments. See Note 2. Divestitures, to our unaudited consolidated financial statements included under Part I, Item 1 of this filing for further discussion.

Previous wording

The Company and Our Home will operate under transition services agreements which end during the first half of 2025. In addition, the parties will operate under reciprocal co-manufacturing agreements under which Our Home will co-manufacture certain of the Company's products and the Company will co-manufacture certain Good Health products. Certain Good Health products will continue to be distributed and sold on the Company's DSD network for Our Home. The Company received approximately $18.7 million in advance from Our Home for certain terms under these agreements for which the Company will recognize through income from operations over the term of the transition services agreements and co-manufacturing agreements.

Current wording

The Company and Our Home are operating under transition services agreements which are scheduled to expire during the first half of 2025. In addition, the parties will operate under reciprocal co-manufacturing agreements pursuant to which Our Home will co-manufacture certain of the Company's products and the Company will co-manufacture certain Good Health products. Certain Good Health products will continue to be distributed and sold on the Company's DSD network for Our Home. The Company received approximately $18.7 million in advance from Our Home for certain terms under these agreements, which the Company will recognize through income from operations over the terms of the transition services and co-manufacturing agreements.

Previous wording

During the thirteen weeks ended June 30, 2024, the Company paid $9.2 million to purchase an indefinite life intangible for use of a third-party brand name. This intangible is included in indefinite life trade names. See Note 5. Goodwill and Intangible Assets, Net.

Current wording

During the thirty-nine weeks ended September 29, 2024, the Company paid $9.2 million to purchase an indefinite life intangible for use of a third-party brand name. This intangible is classified as an indefinite life trade name. See Note 5. Goodwill and Intangible Assets, Net.

Previous wording

We regularly monitor worldwide supply and commodity costs so that we can cost-effectively secure ingredients, packaging and fuel required for production. A number of external factors such as weather, which may be impacted in unanticipated ways due to climate change, commodity market conditions, inflationary conditions, and the effects of governmental, agricultural or other programs, may affect the cost and availability of raw materials and agricultural materials used in our products. We address commodity costs primarily through the use of buying-forward, which locks in pricing for key materials between three and 18 months in advance. Other methods include hedging, net pricing adjustments to cover longer term cost inflation, and manufacturing and overhead cost control. Our hedging techniques, such as forward contracts, limit the impact of fluctuations in the cost of our principal raw materials; however, we may not be able to fully hedge against commodity cost changes, where there is a limited ability to hedge, and our hedging strategies may not protect us from increases in specific raw material costs. We experienced an increase in pricing in certain commodity trends that continued to rise throughout fiscal year 2022 and have since stabilized during fiscal year 2023 and into 2024. Commodity cost increases in commodity trends may adversely impact our net income. Additionally, the Company has experienced rising costs related to fuel and freight rates as well as rising labor costs which have negatively impacted profitability. Transportation costs have been on the rise since early in 2021 and may continue to rise which may also adversely impact net income. The Company looks to offset rising costs through increasing manufacturing and distribution efficiencies as well as through price increases to our customers, although it is unclear whether historic customer sales levels will be maintained at these higher prices. Due to competitive market conditions, planned trade or promotional incentives, or other factors, our pricing actions may also lag commodity cost changes.

Current wording

We regularly monitor worldwide supply and commodity costs so that we can cost-effectively secure ingredients, packaging and fuel required for production. A number of external factors such as weather, which may be impacted in unanticipated ways due to climate change, commodity market conditions, inflationary conditions and the effects of governmental, agricultural or other programs, may affect the cost and availability of raw materials and agricultural materials used in our products. We address commodity costs primarily through the use of buying-forward, which locks in pricing for key materials between three and 18 months in advance. Other methods include hedging, net pricing adjustments to cover longer term cost inflation and manufacturing and overhead cost control. Our hedging techniques, such as forward contracts, limit the impact of fluctuations in the cost of our principal raw materials; however, we may not be able to fully hedge against commodity cost changes, where there is a limited ability to hedge, and our hedging strategies may not protect us from increases in specific raw material costs. We experienced an increase in pricing of certain commodities throughout fiscal year 2022, which has since stabilized during fiscal year 2023 and into 2024. Commodity cost increases may adversely impact our net income. Additionally, the Company has experienced rising costs related to fuel and freight rates as well as rising labor costs, which have negatively impacted profitability. Transportation costs have been on the rise since early 2021 and may continue to rise, which may also adversely impact net income. The Company seeks to offset rising costs through increasing manufacturing and distribution efficiencies as well as through price increases to our customers, although it is unclear whether historic customer sales levels will be maintained at these higher prices. Due to competitive market conditions, planned trade or promotional incentives, or other factors, our pricing actions may also lag commodity cost changes.

Previous wording

While the costs of our principal raw materials fluctuate, we believe there will continue to be an adequate supply of the raw materials we use and that they will generally remain available from numerous sources. Market factors including supply and demand may result in higher costs of sourcing those materials.

Current wording

While the costs of our principal raw materials fluctuate, we believe there will continue to be an adequate supply of the raw materials we use and that they will generally remain available from numerous sources. Market factors may result in higher costs of sourcing those materials.

Previous wording

Our DSD distribution is executed via Company-owned routes operated by route sales professionals ("RSP" or "RSPs"), and third-party routes managed by IOs. We have used the IO and RSP models for more than a decade. In fiscal year 2017, we embarked on a multi-year strategy to convert all company-owned RSP routes to the IO model. As of June 30, 2024, substantially all of our DSD routes are managed by IOs. The conversion process involves selling distribution rights of a defined route to an IO. As we convert a large number of routes in a year, there is a meaningful decrease in the selling, distribution and administrative costs that we previously incurred on RSPs and a corresponding increase in discounts paid to IOs to cover their costs to distribute our product. The net impact is a reduction in selling and distribution expenses and a decrease in net sales and gross profit. Conversions also impact our balance sheet resulting in an increase in cash proceeds to us as a result of selling the route to an IO, or by creating notes receivable related to the sale of the routes.

Current wording

Our DSD distribution is executed via Company-owned routes operated by route sales professionals ("RSPs") and third-party routes managed by IOs. We have used the IO and RSP models for more than a decade. In fiscal year 2017, we embarked on a multi-year strategy to convert all company-owned RSP routes to the IO model. The conversion process involves selling distribution rights of a defined route to an IO. As we convert a routes, there is a decrease in the selling, distribution and administrative costs that we previously incurred on RSPs and a corresponding increase in discounts paid to IOs to cover their costs to distribute our product. The net impact is a reduction in selling and distribution expenses and a decrease in net sales and gross profit. Conversions also impact our balance sheet, resulting in an increase in cash proceeds to us as a result of selling the route to an IO, or by creating notes receivable related to the sale of the routes. While we expect to have a small number of routes under the ownership of the Company as we acquire and re-sell routes as part of our normal operations, as of September 29, 2024, substantially all of our DSD routes are managed by IOs.

Previous wording

The following tables present selected unaudited financial data for the thirteen and twenty-six weeks ended June 30, 2024 and July 2, 2023.

Current wording

The following tables present selected unaudited financial data for the thirteen and thirty-nine weeks ended September 29, 2024 and October 1, 2023.

Previous wording

Net sales were $356.2 million and $362.9 million for the thirteen weeks ended June 30, 2024 and July 2, 2023, respectively. Net sales for the thirteen weeks ended June 30, 2024 decreased $6.7 million or 1.8% over the comparable period in 2023. The Good Health and R.W. Garcia Sale contributed 3.3% to the year-over-year decrease in net sales for thirteen weeks ended June 30, 2024 as well as 0.7% decrease was attributable to changes in pricing and a 0.1% decrease related to the Company's shift to IOs. These decreases in net sales were partially offset by favorable volume/mix of 2.3%. IO discounts increased to $47.7 million for the thirteen weeks ended June 30, 2024 from $45.8 million for the corresponding thirteen weeks ended July 2, 2023.

Current wording

Net sales were $365.5 million and $371.9 million for the thirteen weeks ended September 29, 2024 and October 1, 2023, respectively. Net sales for the thirteen weeks ended September 29, 2024 decreased $6.4 million or 1.7% over the comparable period in 2023. The Good Health and R.W. Garcia Sale contributed 3.6% to the year-over-year decrease. The remaining change, totaling a 1.9% increase in net sales, was related to favorable volume/mix of 2.4% as further discussed below, offset by 0.5% attributable to lower net price realization. IO discounts increased to $46.7 million for the thirteen weeks ended September 29, 2024, up from $45.4 million for the corresponding thirteen weeks ended October 1, 2023.

Previous wording

Sales are evaluated based on classification as Power and Foundation brands. Our Power Brands, which comprise 77% of our volume for the thirteen weeks ended June 30, 2024, are comprised of our iconic heritage Utz brand and iconic On The Border® brand; craft brands such as Zapp’s®, Golden Flake® Pork Skins, TORTIYAHS!, and Hawaiian®; BFY brands such as Boulder Canyon®; strong regional snacking brands such as Bachman®, Tim’s Cascade® Snacks, and "Dirty" Potato Chips®; and selected licensed brands such as TGI Fridays®. Our Foundation Brands, which comprise 23% of our volume for the thirteen weeks ended June 30, 2024, include strong regional snacking brands, such as Golden Flake® Chips and Cheese, and Snyder of Berlin®, as well as other partner and private label brands. For the thirteen weeks ended June 30, 2024, Power brand volume increased by approximately 4%, while Foundation brand volume decreased by approximately 10% as compared to the thirteen weeks ended July 2, 2023.

Current wording

Sales are evaluated based on classification as Power Brands and Foundation Brands. Our Power Brands, which represent 79% of our volume for the thirteen weeks ended September 29, 2024, include Utz®, On The Border®, Zapp’s®, Boulder Canyon®, Golden Flake® Pork, TGI Friday’s®, Hawaiian®, Tim’s Cascade®, TORTYAHS®, Dirty®, and Jax®. Our Foundation Brands, which represent 21% of our volume for the thirteen weeks ended September 29, 2024, include Golden Flake® ex-Pork, Snyder of Berlin®, Bachman®, H.K. Anderson®, Vitner’s®, Kitchen Cooked®, Wachusett®, and other small brands, and also includes Partner brands, Private Label, Co-Man, and Utz Branded non-salty snacks such as On The Border® Dips and Salsa. For the thirteen weeks ended September 29, 2024, Power Brand volume increased by approximately 4%, while Foundation Brand volume decreased by approximately 7% as compared to the thirteen weeks ended October 1, 2023.

Previous wording

Gross profit was $124.8 million and $117.4 million for the thirteen weeks ended June 30, 2024 and July 2, 2023, respectively. Our gross profit margin was 35.0% for the thirteen weeks ended June 30, 2024 versus 32.4% for the thirteen weeks ended July 2, 2023. The increase in gross profit and gross profit margin was primarily driven by benefits from productivity and favorable sales volume/mix offset by lower pricing, supply chain cost inflation, and investments to support the Company’s productivity initiatives. Additionally, IO discounts increased to $47.7 million for the thirteen weeks ended June 30, 2024 from $45.8 million for the thirteen weeks ended July 2, 2023.

Current wording

Gross profit was $131.0 million and $119.3 million for the thirteen weeks ended September 29, 2024 and October 1, 2023, respectively. Our gross profit margin was 35.8% for the thirteen weeks ended September 29, 2024 versus 32.1% for the thirteen weeks ended October 1, 2023. The increase in gross profit and gross profit margin was primarily driven by benefits from productivity and favorable sales volume/mix which more than offset supply chain cost inflation, investments to support the Company’s productivity initiatives and promotional activities. Additionally, IO discounts increased to $46.7 million for the thirteen weeks ended September 29, 2024, up from $45.4 million for the thirteen weeks ended October 1, 2023.

Previous wording

Other income (expense), net was $1.6 million and $(11.9) million for the thirteen weeks ended June 30, 2024 and July 2, 2023, respectively. The increase of $13.6 million in other income for the thirteen weeks ended June 30, 2024 compared to the thirteen weeks ended July 2, 2023 was primarily due to an increase in the gain on the remeasurement of warrant liability of $10.1 million for the thirteen weeks ended June 30, 2024 and the decrease in interest expense of $4.8 million primarily related to the $141.0 million payment on our Term Loan B and $8.5 million payment on our Real Estate Term Loan during the twenty-six weeks ended June 30, 2024, as well as the additional payment on our Real Estate Term Loan of $9.2 million during the thirteen weeks ended June 30, 2024. This increase was partially offset by the loss on debt extinguishment of $1.3 million recognized during the thirteen weeks ended June 30, 2024. See Note 8. Term Debt, Revolving Credit Facility, and Other Notes Payablefor further discussion.

Current wording

Other (expense) income, net was $(18.5) million and $0.8 million for the thirteen weeks ended September 29, 2024 and October 1, 2023, respectively. The increase of $19.3 million in other expense for the thirteen weeks ended September 29, 2024 compared to the thirteen weeks ended October 1, 2023 was primarily due to an increase in the loss on the remeasurement of the warrant liability of $22.4 million for the thirteen weeks ended September 29, 2024, partially offset by a decrease in interest expense of $2.9 million primarily related to the $141.0 million payment on our Term Loan B and $17.7 million payment on our Real Estate Term Loan during the thirty-nine weeks ended September 29, 2024. See Note 8. Term Debt, Revolving Credit Facility, and Other Notes Payablefor further discussion.

Previous wording

Net sales were $702.7 million and $714.3 million for the twenty-six weeks ended June 30, 2024 and July 2, 2023, respectively. Net sales for the twenty-six weeks ended June 30, 2024 decreased $11.6 million or 1.6% over the comparable period in 2023. The Good Health and R.W. Garcia Sale contributed 2.8% to the year-over-year decrease in net sales for twenty-six weeks ended June 30, 2024 and an additional 0.3% of the decrease was related to continued IO conversions and decrease of 0.1% related to pricing. The decrease in net sales was partially offset by favorable volume/mix of 1.6%. IO discounts increased to $92.1 million for the twenty-six weeks ended June 30, 2024 from $88.0 million for the corresponding twenty-six weeks ended July 2, 2023.

Current wording

Net sales were $1,068.2 million and $1,086.1 million for the thirty-nine weeks ended September 29, 2024 and October 1, 2023, respectively. Net sales for the thirty-nine weeks ended September 29, 2024 decreased $17.9 million or 1.6% over the comparable period in 2023. The Good Health and R.W. Garcia Sale contributed 3.1% to the year-over-year decrease and 0.2% related to continued IO conversions. The remaining change, totaling a 1.7% increase in net sales, was related to a favorable volume/mix of 1.8% as further discussed below, offset by 0.1% related to lower price realization. IO discounts increased to $138.8 million for the thirty-nine weeks ended September 29, 2024, up from $133.5 million for the corresponding thirty-nine weeks ended October 1, 2023.

Previous wording

Gross profit was $244.3 million and $221.9 million for the twenty-six weeks ended June 30, 2024 and July 2, 2023, respectively. Our gross profit margin was 34.8% for the twenty-six weeks ended June 30, 2024 versus 31.1% for the twenty-six weeks ended July 2, 2023. The increase in gross profit and gross profit margin was primarily driven by productivity and favorable sales volume/mix more than offset lower pricing, supply chain cost inflation, and investments to support the Company’s productivity initiatives. Additionally, IO discounts increased to $92.1 million for the twenty-six weeks ended June 30, 2024 from $88.0 million for the twenty-six weeks ended July 2, 2023.

Current wording

Gross profit was $375.4 million and $341.2 million for the thirty-nine weeks ended September 29, 2024 and October 1, 2023, respectively. Our gross profit margin was 35.1% for the thirty-nine weeks ended September 29, 2024 versus 31.4% for the thirty-nine weeks ended October 1, 2023. The increase in gross profit and gross profit margin were primarily driven by benefits from productivity and favorable sales volume/mix which more than offset supply chain cost inflation, investments to support the Company’s productivity initiatives and slightly lower pricing. Additionally, IO discounts increased to $138.8 million for the thirty-nine weeks ended September 29, 2024, up from $133.5 million for the thirty-nine weeks ended October 1, 2023.

Previous wording

Selling, distribution, and administrative expenses were $104.6 million and $114.5 million for the thirteen weeks ended June 30, 2024 and July 2, 2023, respectively, resulting in an decrease of $9.9 million or 8.6% for the thirteen weeks ended June 30, 2024 over the corresponding period in fiscal year 2023. The decrease in expenses for the thirteen weeks ended June 30, 2024 compared to the thirteen weeks ended July 2, 2023 was primarily attributable to the $7.6 million of impairment expense and the $1.3 million of severance expense related to the closure of the manufacturing operation at the Birmingham, AL facility as discussed in Note 4. Property, Plant and Equipment, Net. During the thirteen weeks ended July 2, 2023, the Company also recognized a liability and related expense of $4.7 million related to a contract termination with a co-manufacturer, which is recorded in the administrative line on the Consolidated Statement of Operations and Comprehensive Income (Loss). This agreement was a continuation of the Company's response to shifting production from a manufacturing facility that was damaged by a natural disaster in 2021. This decrease was partially offset by increased marketing spend, higher distribution costs, and investments in capabilities.

Current wording

Selling, distribution, and administrative expenses were $324.1 million and $326.0 million for the thirty-nine weeks ended September 29, 2024 and October 1, 2023, respectively, resulting in a decrease of $2.0 million or 0.6% for the thirty-nine weeks ended September 29, 2024 over the corresponding period in fiscal year 2023. The decrease in selling, distribution, and administrative expense was primarily attributable to $9.5 million related to the impairment of fixed assets, primarily related to the closure of the manufacturing operation at the Birmingham, AL facility during the thirty-nine weeks ended October 1, 2023 as discussed in Note 4. Property, Plant and Equipment, Net. The Company also recognized a liability and related expense of $4.7 million related to a contract termination with a co-manufacturer, which is recorded in the administrative line in the Consolidated Statement of Operations and Comprehensive Income (Loss) during the thirty-nine weeks ended October 1, 2023. This agreement was a continuation of the Company's response to shifting production from a manufacturing facility that was damaged by a natural disaster in 2021. This decrease was partially offset by an increased marketing spend, higher distribution costs, and investments in selling capabilities to support distribution growth in Expansion geographies.

Previous wording

Other income (expense), net was $20.9 million and $(26.9) million for the twenty-six weeks ended June 30, 2024 and July 2, 2023, respectively. The increase in other income of $47.9 million for the twenty-six weeks ended June 30, 2024 compared to the thirteen weeks ended July 2, 2023 was primarily due to the gain on sale of business of $44.0 million relating to the Good Health and R.W. Garcia Sale which occurred on February 5, 2024. See Note 2. Divestitures for further discussion. and the decrease in interest expense of $5.4 million primarily related to the $141.0 million payment on our Term Loan B and $8.5 million payment on our Real Estate Term Loan during the twenty-six weeks ended June 30, 2024 as well as the additional payment on our Real Estate Term Loan of $9.2 million during the thirteen weeks ended June 30, 2024. This increase was partially offset by the loss on debt extinguishment of $1.3 million recognized during the thirteen weeks ended June 30, 2024. See Note 8. Term Debt, Revolving Credit Facility, and Other Notes Payablefor further discussion.

Current wording

Other income (expense), net was $2.3 million and $(26.1) million for the thirty-nine weeks ended September 29, 2024 and October 1, 2023, respectively. The increase in other income of $28.4 million for the thirty-nine weeks ended September 29, 2024 compared to the thirty-nine weeks ended October 1, 2023 was primarily due to the gain on sale of business of $44.0 million relating to the Good Health and R.W. Garcia Sale which occurred on February 5, 2024. See Note 2. Divestitures, for further discussion. The decrease in interest expense of $8.3 million primarily related to the $141.0 million payment on our Term Loan B and the $17.7 million payment on our Real Estate Term Loan during the thirty-nine weeks ended September 29, 2024. This increase was partially offset by an increase in the loss on the remeasurement of the warrant liability of $21.9 million and the loss on debt extinguishment of $1.3 million recognized during the thirty-nine weeks ended September 29, 2024. See Note 8. Term Debt, Revolving Credit Facility, and Other Notes Payable, for further discussion.

Previous wording

Income tax expense (benefit) was $25.2 million and $(3.3) million for the twenty-six weeks ended June 30, 2024 and July 2, 2023, respectively. The increase in income tax expense for the twenty-six weeks ended June 30, 2024 versus the corresponding period in fiscal year 2023 is primarily attributable to the Good Health and R.W. Garcia Sale which occurred on February 5, 2024. See Note 2. Divestitures for further discussion.

Current wording

Income tax expense (benefit) was $25.4 million and $(13.4) million for the thirty-nine weeks ended September 29, 2024 and October 1, 2023, respectively. The increase in income tax expense for the thirty-nine weeks ended September 29, 2024 versus the corresponding period in fiscal year 2023 is primarily attributable to the Good Health and R.W. Garcia Sale, which occurred on February 5, 2024. See Note 2. Divestitures, for further discussion.

Previous wording

Adjusted EBITDA is one of the key performance indicators we use in evaluating our operating performance and in making financial, operating, and planning decisions. We believe EBITDA and Adjusted EBITDA are useful to investors in the evaluation of our operating performance compared to other companies in the salty snack industry, as similar measures are commonly used by companies in this industry, however, we caution that other companies may use different definitions from us and such figures may not be directly comparable to our figures. We also report Adjusted EBITDA as a percentage of Net Sales as an additional measure for investors to evaluate our Adjusted EBITDA margins on Net Sales.

Current wording

Adjusted EBITDA is one of the key performance indicators we use in evaluating our operating performance and in making financial, operating and planning decisions. We believe EBITDA and Adjusted EBITDA are useful to investors in the evaluation of our operating performance compared to other companies in the salty snack industry, as similar measures are commonly used by companies in this industry. However, we caution that other companies may use different definitions from us, and their figures may not be directly comparable to our figures. We also report Adjusted EBITDA as a percentage of Net Sales as an additional measure for investors to evaluate our Adjusted EBITDA margins on Net Sales.

Previous wording

The following table provides a reconciliation from net income (loss) to EBITDA and Adjusted EBITDA for the thirteen and twenty-six weeks ended June 30, 2024 and July 2, 2023:

Current wording

The following table provides a reconciliation from net income (loss) to EBITDA and Adjusted EBITDA for the thirteen and thirty-nine weeks ended September 29, 2024 and October 1, 2023:

Previous wording

Incentive programs – The Company incurred $4.5 million and $3.4 million of share-based compensation expense, that was awarded to associates and directors, and compensation expense associated with the employee stock purchase plan (the "ESPP") and the omnibus equity incentive plan (the"OEIP") for the thirteen weeks ended June 30, 2024 and July 2, 2023, respectively. The Company incurred $8.4 million and $8.1 million of share-based compensation expense, that was awarded to associates and directors, and compensation expense associated with the ESPP and the OEIP for the twenty-six weeks ended June 30, 2024 and July 2, 2023, respectively.

Current wording

Incentive programs – The Company incurred $4.7 million and $3.7 million of share-based compensation expense, which was awarded to associates and directors, and compensation expense associated with the employee stock purchase plan (the "ESPP") and the omnibus equity incentive plan (the "OEIP") for the thirteen weeks ended September 29, 2024 and October 1, 2023, respectively. The Company incurred $13.1 million and $11.8 million of share-based compensation expense, which was awarded to associates and directors, and compensation expense associated with the ESPP and the OEIP for the thirty-nine weeks ended September 29, 2024 and October 1, 2023, respectively.

Previous wording

Purchase Commitments and Other Adjustments – We have purchase commitments for specific quantities at fixed prices for certain of our products’ key ingredients. To facilitate comparisons of our underlying operating results, this adjustment was made to remove the volatility of purchase commitments related to unrealized gains and losses. The adjustment related to Purchase Commitments and Other Adjustments, including cloud computing amortization was expense (income) of $0.4 million and $(2.5) million for the thirteen weeks ended June 30, 2024 and July 2, 2023, respectively. The adjustment related to Purchase Commitments and Other Adjustments, including cloud computing amortization was $0.5 million and $0 million for the twenty-six weeks ended June 30, 2024 and July 2, 2023, respectively.

Current wording

Purchase Commitments and Other Adjustments – We have purchase commitments for specific quantities at fixed prices for certain of our products’ key ingredients. To facilitate comparisons of our underlying operating results, this adjustment was made to remove the volatility of purchase commitments related to unrealized gains and losses. The adjustment related to Purchase Commitments and Other Adjustments, including cloud computing amortization was expense of $1.5 million and $2.3 million for the thirteen weeks ended September 29, 2024 and October 1, 2023, respectively. The adjustment related to Purchase Commitments and Other Adjustments, including cloud computing amortization was $2.0 million and $2.4 million for the thirty-nine weeks ended September 29, 2024 and October 1, 2023, respectively.

Previous wording

(3)Adjustment for Acquisition, Divestiture and Integration Costs and (Gains) – Such expenses were $1.1 million and $3.4 million for the thirteen weeks ended June 30, 2024 and July 2, 2023, respectively; and $6.7 million and $8.3 million for the twenty-six weeks ended June 30, 2024 and July 2, 2023, respectively. Additionally, other acquisitions and integration costs (income) of $0.3 million were recorded for the thirteen weeks ended July 2, 2023 and $(0.9) million for the twenty-six weeks ended July 2, 2023 related to the change in the liability associated with the Tax Receivable Agreement entered into in connection with the consummation of the business combination by the Company (formerly Collier Creek Holdings) with Utz Brands Holdings, LLC (“UBH”) pursuant to the terms of the Business Combination Agreement, dated as of June 5, 2020. Also included for the twenty-six weeks ended June 30, 2024 was a gain of $44.0 million related to the Good Health and R.W. Garcia Sale.

Current wording

(3)Adjustment for Acquisition, Divestiture and Integration Costs and (Gains) – Such expenses were $2.8 million and $1.2 million for the thirteen weeks ended September 29, 2024 and October 1, 2023, respectively; and $9.5 million and $9.5 million for the thirty-nine weeks ended September 29, 2024 and October 1, 2023, respectively. Additionally, other acquisitions and integration costs (income) of $0.1 million were recorded for the thirteen weeks ended October 1, 2023 and $(0.8) million for the thirty-nine weeks ended October 1, 2023 related to the change in the liability associated with the TRA entered into in connection with the consummation of the business combination of UBI with UBH pursuant to the terms of the Business Combination Agreement, dated as of June 5, 2020. Also included for the thirty-nine weeks ended September 29, 2024 was a gain of $44.0 million related to the Good Health and R.W. Garcia Sale.

Previous wording

(4)Business Transformation Initiatives Adjustment – This adjustment is related to consultancy, professional, and legal fees incurred for specific initiatives and structural changes to the business that do not reflect the cost of normal business operations. In addition, gains and losses realized from the sale of distribution rights to IOs and the subsequent disposal of trucks, severance costs associated with the elimination of RSP positions, and enterprise resource planning system transition costs, fall into this category. The Company incurred such costs of $4.5 million and $5.6 million for the thirteen weeks ended June 30, 2024 and July 2, 2023, respectively, and $10.3 million and $13.8 million for the twenty-six weeks ended June 30, 2024 and July 2, 2023, respectively. Additionally, the thirteen and twenty-six weeks ended July 2, 2023 also includes expense of $4.7 million related to a contract termination. This agreement was a continuation of the Company's response to shifting production from a manufacturing facility that was damaged by a natural disaster in 2021.

Current wording

(4)Business Transformation Initiatives Adjustment – This adjustment is related to consultancy, professional and legal fees incurred for specific initiatives and structural changes to the business that do not reflect the cost of normal business operations. In addition, gains and losses realized from the sale of distribution rights to IOs and the subsequent disposal of trucks, severance costs associated with the elimination of RSP positions, and enterprise resource planning system transition costs, fall into this category. The Company incurred such costs of $8.1 million and $6.1 million for the thirteen weeks ended September 29, 2024 and October 1, 2023, respectively, and $18.4 million and $24.6 million for the thirty-nine weeks ended September 29, 2024 and October 1, 2023, respectively. Additionally, the thirteen and thirty-nine weeks ended October 1, 2023 also includes expense of $4.7 million related to a contract termination. This agreement was a continuation of the Company's response to shifting production from a manufacturing facility that was damaged by a natural disaster in 2021.

Previous wording

We believe that the cash provided by operating activities, our revolving credit facility, our term loans, and derivative financial instruments will continue to provide sufficient liquidity for our working capital needs, planned capital expenditures and future payments of our contractual, and tax obligations. We continually evaluate our financing strategy to meet our short- and longer-term capital needs. From time-to-time, we may dispose of assets or enter into other cash generating transactions, such as through a sale-leaseback, when we deem beneficial. To date, we have been successful in generating cash and raising financing as needed. However, if a serious economic or credit market crisis ensues or other adverse developments arise, it could have a material adverse effect on our liquidity, results of operations and financial condition.

Current wording

We believe that the cash provided by our operating activities, revolving credit facility, term loans, and derivative financial instruments will continue to provide sufficient liquidity for our working capital needs, planned capital expenditures and future payments of our contractual and tax obligations, both in the short term and long term. We continually evaluate our financing strategy to meet our short- and longer-term capital needs. From time-to-time, we may dispose of assets or enter into other cash generating transactions, such as through a sale-leaseback, when we deem beneficial. To date, we have been successful in generating cash and raising financing as needed. However, if a serious economic or credit market crisis ensues or another adverse development arises, it could have a material adverse effect on our liquidity, results of operations and financial condition.

Previous wording

On April 17, 2024, the Company amended its Term Loan B to refinance in full all of the $630.0 million outstanding term loans and reduce the interest rate from the SOFR plus the applicable rate of 3.00% plus a credit spread adjustment to SOFR plus the applicable rate of 2.75%, as well as certain other changes. Other material terms of the Term Loan B, including the January 2028 maturity date, remain unchanged. The Company recorded a loss on debt extinguishment of $1.3 million related to the refinancing of its Term Loan B in its Consolidated Statement of Operations and Comprehensive Income (Loss) for the thirteen weeks ended June 30, 2024 and twenty-six weeks ended June 30, 2024. On April 17, 2024, the Company amended its asset-based revolving credit facility ("ABL facility") to reduce the rate from SOFR plus the applicable rate ranging from 1.50%-2.00% plus a credit spread adjustment to SOFR plus the applicable rate ranging from 1.50%-2.00%, as well as certain other changes. Other material terms of the ABL, including maturity date, remain unchanged.

Current wording

On April 17, 2024, the Company amended its Term Loan B to refinance in full all of the $630.3 million outstanding in term loans and reduce the interest rate from SOFR plus the applicable rate of 3.00% plus a credit spread adjustment to SOFR plus the applicable rate of 2.75%, as well as make certain other changes. Other material terms of the Term Loan B, including the January 2028 maturity date, remain unchanged. The Company recorded a loss on debt extinguishment of $1.3 million related to the refinancing of its Term Loan B in its Consolidated Statement of Operations and Comprehensive Income (Loss) for the thirty-nine weeks ended September 29, 2024. On April 17, 2024, the Company also amended its asset-based revolving credit facility ("ABL facility") to reduce the rate from SOFR plus the applicable rate ranging from 1.50%-2.00% plus a credit spread adjustment to SOFR plus the applicable rate ranging from 1.50%-2.00%, as well as certain other changes. Other material terms of the ABL facility, including maturity date, remain unchanged.

Previous wording

As of June 30, 2024 and December 31, 2023, $45.2 million and $0.4 million, respectively, was outstanding under the Company's ABL facility. Availability under the ABL facility is based on a monthly accounts receivable and inventory borrowing base certification, which is net of outstanding letters of credit and amounts borrowed. As of June 30, 2024 and December 31, 2023, $130.3 million and $158.4 million, respectively, was available for borrowing, net of letters of credit. Standby letters of credit in the amount of $10.3 million and $12.2 million have been issued as of June 30, 2024 and December 31, 2023, respectively. The standby letters of credit are primarily issued for insurance purposes. Refer to Note 8. Term Debt, Revolving Credit Facility, and Other Notes Payable for more information.

Current wording

2023, $158.8 million and $158.4 million, respectively, was available for borrowing, net of letters of credit. Standby letters of credit in the amount of $10.3 million and $12.2 million have been issued as of September 29, 2024 and December 31, 2023, respectively. The standby letters of credit are primarily issued for insurance purposes. Refer to Note 8. Term Debt, Revolving Credit Facility, and Other Notes Payable, for more information.

Previous wording

•Long-term cash requirements primarily relate to funding long-term debt repayments and related interest payment on long-term debt (Refer to Note 8. Term Debt, Revolving Credit Facility, and Other Notes Payable);

Current wording

•Long-term cash requirements primarily related to funding long-term debt repayments and related interest payment on long-term debt (Refer to Note 8. Term Debt, Revolving Credit Facility, and Other Notes Payable);

Previous wording

The Company partially guarantees loans made to IOs by Bank of America and two other banks for the purchase of routes, some of which was recorded on the Company's Consolidated Balance Sheet and some of which were off-balance sheet arrangements. These loans are collateralized by the routes for which the loans are made. Accordingly, the Company has the ability to recover substantially all of the outstanding loan value upon default. Refer to Note 10. Contingencies.

Current wording

The Company partially guarantees loans made to IOs by Bank of America and two other banks for the purchase of routes, some of which was recorded in the Company's Consolidated Balance Sheet and some of which were off-balance sheet arrangements. These loans are collateralized by the routes for which the loans are made. Accordingly, the Company has the ability to recover substantially all of the outstanding loan value upon default. Refer to Note 10. Contingencies.

Previous wording

The following table presents net cash provided by operating activities, investing activities and financing activities for the twenty-six weeks ended June 30, 2024 and July 2, 2023.

Current wording

The following table presents net cash provided by operating activities, investing activities and financing activities for the thirty-nine weeks ended September 29, 2024 and October 1, 2023.

Previous wording

Net cash used in operating activities for the twenty-six weeks ended June 30, 2024 was $0.2 million compared to $4.3 million twenty-six weeks ended July 2, 2023, with the difference largely driven by increases in accounts payable and accrued expenses and other, partially offset by a decrease related to the timing of accounts receivable, net and prepaid expenses and other assets, which includes approximately $30 million impact from the Good Health and R.W. Garcia Sale and Manufacturing Facilities Sale.

Current wording

Net cash provided by operating activities for the thirty-nine weeks ended September 29, 2024 was $52.0 million compared to $49.1 million for the thirty-nine weeks ended October 1, 2023, with the difference largely driven by increases in accounts payable and accrued expenses and other, and cash net income, partially offset by a decrease related to the timing of accounts receivable, net, as well as inventories and prepaid expenses and other assets, which includes approximately $30 million impact from the Good Health and R.W. Garcia Sale and Manufacturing Facilities Sale.

Previous wording

Cash provided by investing activities for the twenty-six weeks ended June 30, 2024 was $140.9 million, primarily driven by proceeds from sale of business of $167.5 million, proceeds from sale of property and equipment primarily related to the sale of the manufacturing facilities in Birmingham, AL, Berlin, PA and Fitchburg, MA and proceeds from the sale of routes to IOs. These proceeds were partially offset by purchases of property and equipment, notes receivable and purchase of intangibles related to an indefinite life intangible for the use of a third party brand name. This compares to the cash used in investing activity of $30.8 million for the twenty-six weeks ended July 2, 2023 primarily driven by purchases of property and equipment.

Current wording

Cash provided by investing activities for the thirty-nine weeks ended September 29, 2024 was $116.1 million, primarily driven by proceeds from sale of business of $167.5 million, proceeds from sale of property and equipment primarily related to the sale of the manufacturing facilities in Birmingham, AL, Berlin, PA and Fitchburg, MA and proceeds from the sale of routes to IOs. These proceeds were partially offset by purchases of property and equipment, notes receivable and purchase of intangibles related to an indefinite life intangible for the use of a third-party brand name. This compares to the cash used in investing activity of $37.5 million for the thirty-nine weeks ended October 1, 2023 primarily driven by purchases of property and equipment.

Previous wording

Net cash used in financing activities was $126.2 million for the twenty-six weeks ended June 30, 2024, primarily driven by the pay down of debt utilizing the proceeds from the Good Health and R.W. Garcia Sale partially offset by borrowings on line of credit as well as payment of dividends and distribution to noncontrolling interest versus net cash provided by financing activities of $35.8 million for the twenty-six weeks ended July 2, 2023, which was primarily a result of a draw on the line of credit of $61.0 million partially offset by repayments on term debt and notes payable, payments of dividends and distribution to noncontrolling interest.

Current wording

Net cash used in financing activities was $155.2 million for the thirty-nine weeks ended September 29, 2024, primarily driven by the pay down of debt utilizing the proceeds from the Good Health and R.W. Garcia Sale partially offset by borrowings on line of credit as well as payment of dividends and distributions to noncontrolling interest versus net cash used in financing activities of $24.5 million for the thirty-nine weeks ended October 1, 2023, which was primarily a result of repayments on term debt and notes payable, payments of dividends and distributions to noncontrolling interest partially offset by net borrowings on the line of credit.

Previous wording

The Term Loan B and the ABL facility are collateralized by substantially all of the assets and liabilities of UBH and its subsidiaries excluding the real estate assets secured by the Real Estate Term Loan, including equity interests in certain of UBH’s subsidiaries. The credit agreements contain certain affirmative and negative covenants as to operations and the financial condition of UBH and its subsidiaries. UBH and its subsidiaries were in compliance with its financial covenants as of June 30, 2024.

Current wording

The Term Loan B and the ABL facility are collateralized by substantially all of the assets and liabilities of UBH and its subsidiaries excluding the real estate assets secured by the Real Estate Term Loan, including equity interests in certain of UBH’s subsidiaries. The credit agreements contain certain affirmative and negative covenants as to operations and the financial condition of UBH and its subsidiaries. UBH and its subsidiaries were in compliance with their financial covenants as of September 29, 2024.

Previous wording

See Note 1. Operations and Summary of Significant Accounting Policiesto the unaudited consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Current wording

See Note 1. Operations and Summary of Significant Accounting Policies, to the unaudited consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q.