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Financial report summary
?Risks
- Our gross profit margins may be impacted by a variety of factors, including but not limited to variations in raw materials pricing, retail customer ordering patterns, requirements and mix, sales velocities and required promotional support.
- Consumers’ loyalty to our brands may change due to factors beyond our control, which could have a material adverse effect on our business and operating results.
- Demand for our products may be adversely affected by changes in consumer preferences and tastes or if we are unable to innovate or market our products effectively.
- Price reductions implemented by our competitors may negatively impact our sales and shelf space, and may require us to similarly reduce costs or expend additional resources to remain competitive.
- Fluctuations in our results of operations from quarter to quarter because of changes in our promotional activities may impact, and may have a disproportionate effect on, our overall financial condition and results of operations.
- Our reputation or brand image might be impacted as a result of issues or concerns relating to the quality and safety of our products, ingredients or packaging, processing techniques, and other environmental, social or governance matters, which in turn could negatively impact our operating results.
- If our products become adulterated or are mislabeled, we might need to recall those items, and we may experience product liability claims and damage to our reputation.
- Slotting fees and customer charges or charge-backs for promotion allowances, cooperative advertising, and product or packaging damages, as well as undelivered or unsold food products may have a significant impact on our operating results and may disrupt our customer relationships.
- We do not have many contracts with our customers that require the purchase of a minimum amount of our products.
- We operate in the highly competitive snack food industry, which may reduce our ability to sell our products to our customers or consumers if we are unable to compete effectively.
- We face competition in our business from private label, generic or store branded products which may result in price point pressures, leading to decreased demand for our products.
- Changes in retail distribution arrangements can result in the loss of retail shelf space and disrupt sales of food products, causing our sales to fall.
- Our DTW delivery network system relies on a significant number of brokers, wholesalers and logistics companies. Such reliance could affect our ability to effectively and profitably distribute and market products, maintain existing markets and expand business into other geographic markets.
- Our DSD network system and regional third-party distributor network relies on a significant number of independent operators and third-party distributors, and such reliance could affect our ability to effectively and profitably distribute and market products, maintain existing markets and expand business into other geographic markets.
- A disruption in the operation of the DSD network, regional third-party distributor network or DTW system could negatively affect our results of operations, financial condition and cash flows.
- The evolution of e-commerce sales channels may adversely affect our business, financial condition or results of operations.
- The rapid expansion of hard discounters may adversely affect our business, financial condition or results of operations.
- Disruption to our manufacturing operations, supply chain or distribution channels could impair our ability to produce or deliver finished products and negatively impact our operating results.
- Our future results of operations may be adversely affected by input cost inflation.
- Our results could be adversely impacted as a result of increased labor and associate-related expenses.
- A continued shortage of qualified labor could negatively affect our business and materially reduce earnings.
- The loss of, or a significant reduction in sales to, any key customer can adversely affect our business, financial condition or results of operations.
- Our business, financial condition or results of operations may be adversely affected by increased costs, disruption of supply or shortages of raw materials, energy, water and other supplies.
- Pandemics, epidemics or other disease outbreaks may change or disrupt consumption and trade patterns, supply chains, and production processes, which could materially affect our operations and results of operations.
- Labor costs and logistical costs are increasing in the current economic climate, which has adversely affected our business operations and results of operations. These rising costs, as well as any increase in commodity costs may adversely affect our business operations and results of operations in the future. Our efforts to raise prices may not be successful at offsetting these cost increases and may have other adverse effects.
- Our financial position may be adversely affected by an unexpected event carrying an insurance obligation for which we have inadequate coverage.
- Changes in the legal and regulatory environment could limit our business activities, increase our operating costs, reduce demand for our products or result in litigation.
- As a food manufacturing company, all of our products must be compliant with regulations by various governmental authorities, the laws of the various states and localities where we operate and sell products, and a number of our products rely on independent certifications from regulatory agencies to label our products adequately and in compliance with laws and regulations. Any non-compliance with regulations or certification could harm our business.
- Our future results of operations may be adversely affected by the availability of ingredients.
- Potential liabilities and costs from litigation, claims, legal or regulatory proceedings, inquiries or investigations can have an adverse impact on our business, financial condition or results of operations.
- We may be unable to successfully identify and execute or integrate acquisitions.
- The geographic concentration of our markets may adversely impact us if we are unable to effectively diversify the markets in which we participate.
- We may not be able to attract and retain the highly skilled people we need to support our business.
- A portion of our workforce is represented by unions. Failure to successfully negotiate collective bargaining agreements, or strikes or work stoppages, could cause our business to suffer.
- We may not be successful in implementing our growth strategy, including without limitation, increasing distribution of our products, attracting new consumers to our brands, driving repeat purchase of our products, enhancing our brand recognition, and introducing new products and product extensions, in each case in a cost-effective manner, on a timely basis, or at all.
- Impairment in the carrying value of goodwill or other intangible assets could have an adverse impact on our financial results.
- Disruptions in the worldwide economy may materially and adversely affect our business, financial condition and results of operations.
- Disruptions, failures or security breaches of our information technology infrastructure could have a negative impact on our operations.
- Improper use or misuse of social media may have an adverse effect on our business and financial results.
- Climate change or legal, regulatory or market measures to address climate change may negatively affect our business and operations or damage our reputation.
- Liabilities, claims or new laws or regulations with respect to environmental matters could have a significant negative impact on our business.
- We are subject to increasing focus on ESG issues, including those related to climate change, and any perceived failure by us to meet ESG initiatives may negatively impact our business.
- Our debt instruments contain covenants that impose restrictions on our operations that may adversely affect our ability to operate our business if we fail to meet those covenants or otherwise suffer a default thereunder.
- Changes in interest rates may adversely affect our earnings and/or cash flows.
- Increases in income tax rates, changes in income tax laws or disagreements with tax authorities can adversely affect our business, financial condition or results of operations.
- The imposition or proposed imposition of new or increased taxes aimed at our products can adversely affect our business, financial condition or results of operations.
- Resales of shares of our Class A Common Stock could cause the market price of our Class A Common Stock to drop significantly, even if our business is doing well.
- We are a holding company and our only material asset is our interest in UBH, and we are accordingly dependent upon distributions made by our subsidiaries to pay taxes, make payments under the TRA and pay dividends.
- In certain cases, payments under the TRA may exceed the actual tax benefits we realize or be accelerated.
- The NYSE may delist our Class A Common Stock from trading on its exchange, which could limit investors’ ability to make transactions in shares of our Class A Common Stock and subject us to additional trading restrictions.
- Reports published by analysts, including projections in those reports that differ from our actual results, could adversely affect the price and trading volume of our Class A Common Stock.
- Delaware law, the Certificate of Incorporation and Bylaws contain certain provisions, including anti-takeover provisions that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.
- The Certificate of Incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other associates.
- Certain of our significant stockholders and Utz Brands Holdings members whose interests may differ from those of our other stockholders will have the ability to significantly influence our business and management.
- The Certificate of Incorporation does not limit the ability of the successors to the Sponsor to compete with us, and any competitive behavior by the Sponsor could negatively impact our business.
- Our business and operations could be negatively affected if it becomes subject to any securities litigation or shareholder activism, which could cause us to incur significant expense, hinder execution of business and growth strategy and impact our stock price.
- We may not have sufficient funds to satisfy indemnification claims of our directors and executive officers.
- The valuation of our Private Placement Warrants could increase the volatility in our net income (loss) in our consolidated statements of earnings (loss).
- Our Private Placement Warrants may have an adverse effect on the market price of our Class A Common Stock.
- Compliance obligations under the Sarbanes-Oxley Act require substantial financial and management resources.
- The restatement of our financial statements in May 2021 has subjected us to additional risks and uncertainties, including increased professional costs and the increased possibility of legal proceedings.
Management Discussion
- We have prepared our discussion of the results of operations by comparing the results for the fiscal year ended December 31, 2023 to the results of operations for the fiscal year ended January 1, 2023. Refer to Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the fiscal year ended January 1, 2023, for discussion of the results of operations for the fiscal year ended January 1, 2023, compared to the fiscal year ended January 2, 2022, which is incorporated by reference herein.
- Net sales were $1,438.2 million for the fiscal year ended December 31, 2023 and $1,408.4 million for the fiscal year ended January 1, 2023. Net sales for the fiscal year ended December 31, 2023 increased $29.8 million or 2.1% over the fiscal year 2022. The increase in net sales for the fiscal year ended December 31, 2023 was primarily related to the flow-through of pricing actions that were taken in 2022 in response to inflationary pressures which accounted for a 4.6% increase in net sales, partially offset by a volume/mix decline of 1.8% due to SKU rationalization as well as 0.7% decline in net sales related to continued IO conversions.
- IO discounts increased from $156.8 million for the fiscal year ended January 1, 2023 to $179.3 million for the corresponding fiscal year ended December 31, 2023. Excluding the impacts of increased IO discounts related to IO conversions, organic net sales increased 2.8% for the fiscal year ended December 31, 2023 versus the fiscal year ended January 1, 2023.