- Disposition of Three Manufacturing Facilities and Good Health®
and R.W. Garcia® Brands
- Total cash proceeds received of $182.5 million
- Net cash proceeds to be deployed to reduce long-term debt and
accelerate targeted deleveraging timeline by a full year
- Our Home™ to offer employment to Utz associates as part of
transition
- Company provides preliminary fiscal-year 2023 net sales results
and narrows Adj. EBITDA outlook range
Utz Brands, Inc. (NYSE: UTZ) (“Utz” or the “Company”), a leading
U.S. manufacturer of branded salty snacks, today announced that
certain of its subsidiaries including Utz Quality Foods, LLC have
entered into a definitive agreement for the sale of certain assets
and brands to Our Home™, an operating company of Better-for-You
brands that includes Real Food From the Ground Up®,
Popchips®, and Food Should Taste Good® (“Our Home”). Under
the agreement, affiliates of Our Home have agreed to purchase the
Good Health® and R.W. Garcia® brands, the Lincolnton,
NC, and Lititz, PA manufacturing facilities and certain related
assets, and assume the Company’s Las Vegas, NV facility’s lease and
manufacturing operations.
Following the close of the transactions, Utz and Our Home will
operate under a Transition Services Agreement for 12 months. The
total consideration for the transactions is $182.5 million, subject
to customary adjustments, and the transactions are expected to
close on February 5, 2024. In addition, post-closing, the parties
will operate under reciprocal co-manufacturing agreements under
which Our Home will co-manufacture certain Utz products and Utz
will co-manufacture certain Good Health® products. Certain
Good Health® products will continue to be distributed and
sold on the Utz DSD network for Our Home. Our Home plans to
continue to operate and grow the brands and manufacturing
facilities under its platform while offering employment to Utz
associates working in those facilities as part of the
transition.
Howard Friedman, Chief Executive Officer of Utz, said, “We
expect these transactions to deliver on our supply chain
transformation and value creation initiatives, to fast-track our
deleveraging timeline by a full year, and to accelerate our brand
portfolio strategy to better optimize for growth. With this
important step in the optimization of our supply chain and brand
portfolio, together with immediate benefits to free cash flow from
lower interest expense, we are well-positioned to execute against
our expansion plans across the U.S. and deliver on our margin
target.”
Friedman continued, “Our Home’s portfolio of Better-for-You
brands is well aligned with Good Health® and R.W.
Garcia’s® missions of bringing healthy, innovative snacks to
consumers. On behalf of everyone at Utz, I would like to thank our
associates within the Good Health® and R.W. Garcia®
businesses for their many contributions. They have a great place
within Our Home, and I am confident they will have exciting
opportunities ahead.”
Aaron Greenwald, Founder and CEO of Our Home, said, “We are
thrilled to announce this acquisition from Utz as it significantly
scales Our Home’s snacking platform and manufacturing footprint
across the United States. These transactions support our vision to
deliver snacks that satisfy while creating a sense of connection
and comfort at tremendous value. Through our owned-production
facilities led by our invaluable team members, along with a
carefully curated brand portfolio, we aim to be the preferred
choice for those seeking high-quality, Better-for-You snacks.”
Financial Benefits of the Transactions
The transactions are expected to provide approximately $150
million in after-tax net proceeds, which Utz will use to pay down
its long-term debt. The debt reduction is expected to lower
interest expense by approximately $12 million in fiscal 2024 based
on the Company’s current outlook for interest rates, and to
accelerate the Company’s plan for achieving its target of
approximately 3.0x Net Leverage by a full year from the end of
fiscal 2026 to the end of fiscal 2025.
The Company expects the impact of the transactions to be
accretive to its Adjusted Earnings per Share on a full-year basis
in 2024, reflecting the foregone profit related to the Good
Health® and R.W. Garcia® brands, and after factoring
in the benefit of cost savings and the use of net proceeds from the
sale to paydown long-term debt and reduce interest expense. Utz
estimates that Good Health® and R.W. Garcia®-related
products contributed approximately $65 million in net sales for the
fiscal-year ended December 31, 2023.
In addition, at the Company’s recent 2023 Investor Day, Utz
provided fiscal 2026 financial targets that included targeted
Supply Chain Network Optimization cost savings of approximately $45
million to be achieved from 2024 through 2026. The Company expects
that the completion of these transactions will accelerate the
timing of cost savings. Management will further discuss this
impact, in addition to its fiscal year 2024 outlook, on its
fiscal-year 2023 earnings conference call on February 29, 2024.
Preliminary, Unaudited Fiscal-Year 2023 Net Sales Results and
Adjusted EBITDA Outlook
In the fourth quarter of fiscal 2023, the Company’s Circana
total retail sales increased 4.1% and Power Brands increased 5.3%,
both ahead of Salty Snack Category growth of 2.8%. The Company’s
total retail sales growth was led by volume growth of 4.3% compared
to the Salty Snack Category volume decline of (1.9%)(1).
Additionally, based on preliminary financial information, the
Company estimates fourth quarter total net sales declined between
(1.3%) to (0.2%) to between $350 million and $354 million. The
Company anticipates that its net sales growth in the first quarter
of fiscal 2024 to be more consistent with retail sales growth.
For the fiscal-year 2023, based on preliminary financial
information, the Company estimates 2023 total net sales growth in a
range of 2.0% to 2.2%, and is narrowing its fiscal-year 2023
Adjusted EBITDA outlook range to growth of 9.5% to 10.0% versus the
prior expectation of growth of 8% to 11%.
These preliminary results are based on the Company’s current
estimate of its results for the fiscal year ended December 31, 2023
and remain subject to normal year-end accounting procedures and are
subject to change. Under the federal securities laws, the Company
is not permitted to release non-GAAP results until it is able to
disclose the most directly comparable GAAP measure(2). Due to the
Company’s year-end closing process, such GAAP figures are not
available in advance of the release of such information on February
29, 2024, when Utz plans to release its fiscal-year 2023 financial
results. At that time, the Company will host a conference call and
webcast with members of the executive management team to discuss
these results at 8:30 a.m. Eastern Time.
Please visit the “Events & Presentations” section of Utz’s
Investor Relations website at https://investors.utzsnacks.com to
access the live webcast and presentation. The webcast will be
available in listen-only mode, and the replay will be archived on
the “Events & Presentations” section of Utz’s Investor
Relations website.
(1)
Retail sales are Circana Total US MULO-C,
custom Utz Brands hierarchy, 13-weeks ended 12/31/2023; % YoY
growth compared to the comparable period in the prior year on a pro
forma basis.
(2)
See the description of the Non-GAAP
financial measures that accompany this press release.
Advisors
RBC Capital Markets LLC is serving as exclusive financial
advisor and Cozen O’Connor P.C. is serving as legal advisor to Utz
Brands, Inc. Winston & Strawn LLP is serving as legal advisor
to Our Home.
About Utz Brands, Inc.
Utz Brands, Inc. (NYSE: UTZ) manufactures a diverse portfolio of
savory snacks through popular brands including Utz®, On The Border®
Chips & Dips, Golden Flake®, Zapp’s®, Boulder Canyon®, Hawaiian
Brand®, and TORTIYAHS!®, among others.
After a century with strong family heritage, Utz continues to
have a passion for exciting and delighting consumers with delicious
snack foods made from top-quality ingredients. Utz’s products are
distributed nationally through grocery, mass merchandisers, club,
convenience, drug, and other channels. Based in Hanover,
Pennsylvania, Utz has multiple manufacturing facilities located
across the U.S. to serve our growing customer base. For more
information, please visit www.utzsnacks.com or call
1‐800‐FOR‐SNAX.
Investors and others should note that Utz announces material
financial information to its investors using its investor relations
website (https://investors.utzsnacks.com/investors/default.aspx),
U.S. Securities and Exchange Commission filings, press releases,
public conference calls, and webcasts. Utz uses these channels, as
well as social media, to communicate with our stockholders and the
public about the Company, the Company’s products and other Company
information. It is possible that the information that Utz posts on
social media could be deemed to be material information. Therefore,
Utz encourages investors, the media, and others interested in the
Company to review the information posted on the social media
channels listed on Utz’s investor relations website.
About Our Home
Our Home is a leading, independent Better-For-You snack platform
that provides delicious, wholesome snacks at a great value. The
company strives to create nourishing snacks that offer a warm and
welcoming sense of familiarity to communities, catering to every
occasion and satisfying various cravings. This commitment is
demonstrated through the company's ownership of production and
manufacturing facilities spanning all snack sub-categories, and a
portfolio of brands that currently includes Food Should Taste
Good®, Popchips, Real Food From The Ground Up®, and
YOU NEED THIS®.
For more information on Our Home, visit our-home.com.
Non-GAAP Financial Measures:
Utz uses non-GAAP financial information and believes it is
useful to investors as it provides additional information to
facilitate comparisons of historical operating results, identify
trends in our underlying operating results and provide additional
insight and transparency on how we evaluate the business. We use
non-GAAP financial measures to budget, make operating and strategic
decisions, and evaluate our performance. These non-GAAP financial
measures do not represent financial performance in accordance with
generally accepted accounted principles in the United States
(“GAAP”) and may exclude items that are significant in
understanding and assessing financial results. Therefore, these
measures should not be considered in isolation or as an alternative
to net income, cash flows from operations or other measures of
profitability, liquidity or performance under GAAP. You should be
aware that the presentation of these measures may not be comparable
to similarly titled measures used by other companies.
Management believes that non-GAAP financial measures should be
considered as supplements to the GAAP reported measures, should not
be considered replacements for, or superior to, the GAAP measures
and may not be comparable to similarly named measures used by other
companies. We believe that these non-GAAP measures of financial
results provide useful information to investors regarding certain
financial and business trends relating to the financial condition
and results of operations of the Company to date and that the
presentation of non-GAAP financial measures is useful to investors
in the evaluation of our operating performance compared to other
companies in the salty snack industry, as similar measures are
commonly used by the companies in this industry. These non-GAAP
financial measures are subject to inherent limitations as they
reflect the exercise of judgments by management about which expense
and income are excluded or included in determining these non-GAAP
financial measures. The non-GAAP financial measures are not
recognized in accordance with GAAP and should not be viewed as an
alternative to GAAP measures of performance.
Utz uses the following non-GAAP financial measures in its
financial communications, and in the future could use others:
- Adjusted Net Income
- Adjusted Earnings Per Share
- EBITDA
- Adjusted EBITDA
- Adjusted EBITDA as % of Net Sales (Adjusted EBITDA Margin)
- Normalized Adjusted EBITDA
- Net Leverage Ratio
Adjusted Net Income is
defined as Net Income excluding the additional Depreciation and
Amortization expense, a non-cash item, related to the Business
Combination with Collier Creek Holdings and the acquisitions of
Kennedy Endeavors, Kitchen Cooked, Inventure, Golden Flake, Truco
Enterprises, R.W. Garcia and Festida. In addition, Adjusted Net
Income is also adjusted to exclude deferred financing fees,
interest income, and expense relating to IO loans and certain
non-cash items, such as those related to stock-based compensation,
hedging, and purchase commitments adjustments, asset impairments,
acquisition and integration costs, business transformation
initiatives, remeasurement of warrant liabilities and
financing-related costs. Lastly, Adjusted Net Income normalizes the
income tax provision to account for the above-mentioned
adjustments.
Adjusted Earnings Per Share
is defined as Adjusted Net Income (as defined, herein) divided by
the weighted average shares outstanding for each period on a fully
diluted basis, assuming the Private Placement Warrants are net
settled and the Shares of Class V Common Stock held by Continuing
Members is converted to Class A Common Stock.
EBITDA is defined as Net
Income before Interest, Income Taxes, and Depreciation and
Amortization.
Adjusted EBITDA is defined
as EBITDA further adjusted to exclude certain non-cash items, such
as stock-based compensation, hedging and purchase commitments
adjustments, and asset impairments; acquisition and integration
costs; business transformation initiatives; and financing-related
costs. Adjusted EBITDA is one of the key performance indicators we
use in evaluating our operating performance and in making
financial, operating, and planning decisions. We believe Adjusted
EBITDA is useful to the users of this release and financial
information contained in the release in the evaluation of Utz’s
operating performance compared to other companies in the salty
snack industry, as similar measures are commonly used by companies
in this industry. We have historically reported an Adjusted EBITDA
metric to investors and banks for covenant compliance. We also
provide in this release, Adjusted EBITDA as a percentage of Net
Sales, as an additional measure for readers to evaluate our
Adjusted EBITDA margins on Net Sales.
Normalized Adjusted EBITDA
is defined as Adjusted EBITDA after giving effect to
pre-transaction Adjusted EBITDA for certain acquisitions and
dispositions from time to time.
Net Leverage Ratio is
defined as Normalized Adjusted EBITDA divided by Net Debt. Net Debt
is defined as Gross Debt less Cash and Cash Equivalents.
Management believes that the non-GAAP financial measures are
meaningful to investors because they increase transparency and
assist investors to understand and analyze our ongoing operational
performance. The financial measures are shown as supplemental
disclosures in this release because they are widely used by the
investment community for analysis and comparative evaluation. They
also provide additional metrics to evaluate the Company’s
operations and, when considered with both the GAAP results and the
reconciliation to the most comparable GAAP measures, provide a more
complete understanding of the Company’s business than could be
obtained absent this disclosure. The non-GAAP measures are not and
should not be considered an alternative to the most comparable GAAP
measures or any other figure calculated in accordance with GAAP, or
as an indicator of operating performance. The Company’s calculation
of the non-GAAP financial measures may differ from methods used by
other companies. Management believes that the non-GAAP measures are
important to have an understanding of the Company’s overall
operating results in the periods presented. The non-GAAP financial
measures are not recognized in accordance with GAAP and should not
be viewed as an alternative to GAAP measures of performance. As new
events or circumstances arise, these definitions could change. When
the definitions change, we will provide the updated definitions and
present the related non-GAAP historical results on a comparable
basis.
Forward-Looking Statements
This press release includes “forward-looking statements” within
the meaning of the “safe harbor” provisions of the Private
Securities Litigation Reform Act of 1995. The forward-looking
statements contained in this press release include, without
limitation, statements related to the planned sale of Good Health®
and R.W. Garcia® brands and the Lincolnton, NC and Lititz, PA
manufacturing facilities and certain related assets and the timing
and financing thereof; and the expected impact of the planned
transactions, including without limitation, the expected impact on
Utz’s overall market position, the Company’s projected retail
sales, net sales, Adjusted EBITDA and Adjusted EBITDA margins,
included in this press release. Utz’s actual results may differ
from its expectations, estimates and projections and consequently,
you should not rely on these forward-looking statements as
predictions of future events. Words such as “expect,” “estimate,”
“project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,”
“may,” “will,” “could,” “should,” “believes,” “predicts,”
“potential,” “continue,” and similar expressions are intended to
identify such forward-looking statements. These forward-looking
statements include, without limitation, Utz’s expectations with
respect to future performance. These forward-looking statements
involve significant risks and uncertainties that could cause the
actual results to differ materially from the expected results. Most
of these factors are outside Utz’s control and are difficult to
predict. Factors that may cause such differences include, but are
not limited to: whether and when the closing conditions will be
satisfied and whether and when the transaction will close, whether
and when Utz will be able to realize the expected financial results
and accretive effect of the divestiture, and how customers,
competitors, suppliers and employees will react to the divestiture;
the Company’s compliance with forward-looking elements of the
agreement, including but not limited to, certain post-closing
covenants related to the transactions and the rights of Our Home to
indemnification and other remedies under the agreement in the event
the Company fails to comply with such covenants or otherwise
breaches the agreement; the inability of Utz to maintain the
listing of Utz’s Class A Common Stock on the New York Stock
Exchange; the inability of Utz to develop and maintain effective
internal controls; the risk that Utz’s gross profit margins may be
adversely impacted by a variety of factors, including variations in
raw materials pricing, retail customer requirements and mix, sales
velocities and required promotional support; changes in consumers’
loyalty to the Company’s brands due to factors beyond Utz’s
control; changes in demand for Utz’s products affected by changes
in consumer preferences and tastes or if Utz is unable to innovate
or market its products effectively; costs associated with building
brand loyalty and interest in Utz’s products, which may be affected
by Utz’s competitors’ actions that result in Utz’s products not
suitably differentiated from the products of competitors;
fluctuations in results of operations of Utz from quarter to
quarter because of changes in promotional activities; the
possibility that Utz may be adversely affected by other economic,
business or competitive factors; and other risks and uncertainties
set forth in the section entitled “Risk Factors” and
“Forward-Looking Statements” in Utz’s Quarterly Report on Form 10-Q
filed with the U.S. Securities and Exchange Commission on November
9, 2023. There may be additional risks that Utz considers
immaterial or which are unknown. It is not possible to predict or
identify all such risks. Utz cautions that the foregoing list of
factors is not exclusive. Utz cautions readers not to place undue
reliance upon any forward-looking statements, which speak only as
of the date made. Utz does not undertake or accept any obligation
or undertaking to release publicly any updates or revisions to any
forward-looking statements to reflect any change in its
expectations or any change in events, conditions or circumstances
on which any such statement is based, except as otherwise required
by law.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240131068112/en/
Investors Kevin Powers Utz Brands, Inc.
kpowers@utzsnacks.com
Media Kevin Brick Utz Brands, Inc.
kbrick@utzsnacks.com
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