0001739566FALSE00017395662023-08-102023-08-100001739566dei:FormerAddressMember2023-08-102023-08-10
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 10, 2023
Utz Brands, Inc.
(Exact name of registrant as specified in its charter)
| | | | | | | | | | | | | | |
Delaware | | 001-38686 | | 85-2751850 |
(State or other jurisdiction of incorporation) | | (Commission File Number) | | (IRS Employer Identification No.) |
900 High Street
Hanover, PA 17331
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code: (717) 637-6644
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Class A Common Stock, par value $0.0001 per share | | UTZ | | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On August 10, 2023, Utz Brands, Inc. (the "Company") announced via press release the Company’s financial results for the second quarter ended July 2, 2023. A copy of the Company’s press release is attached hereto as Exhibit 99.1 to this Current Report on Form 8-K and is hereby incorporated by reference into this Item 2.02. The information and exhibit contained in this Item 2.02 is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 as amended (the “Exchange Act”), nor shall it be incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), except as shall be expressly set forth by specific reference in such filing.
Item 7.01 Regulation FD Disclosure
The Company will hold a conference call and webcast on August 10, 2023 (see information in the press release under “News” of the Company’s website https://investors.utzsnacks.com). A copy of the slide materials to be discussed at the conference call and webcast is being furnished pursuant to Regulation FD as Exhibit 99.2 to this Current Report on Form 8-K and is hereby incorporated by reference into this Item 7.01. The information and exhibit contained in this Item 7.01 is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, nor shall it be incorporated by reference into any filing under the Securities Act, except as shall be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
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Exhibit No. | Description |
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104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Utz Brands, Inc.
Dated: August 10, 2023
By: /s/ Ajay Kataria
Name: Ajay Kataria
Title: Executive Vice President, Chief Financial Officer
Utz Brands Reports Second Quarter 2023 Results and Raises 2023 Profit Outlook
Hanover, PA –August 10, 2023 – Utz Brands, Inc. (NYSE: UTZ) (“Utz” or the “Company”), a leading U.S. manufacturer of branded salty snacks, today reported financial results for the Company’s second fiscal quarter ended July 2, 2023.
2Q’23 Summary:
•Net sales increased 3.6% year-over-year to $362.9 million
•Organic Net Sales increased 4.3% year-over-year
•Net loss of $(8.6) million vs. net income of $2.5 million in the year-ago period
•Adjusted EBITDA increased 7.1% year-over-year to $45.2 million
•Raising fiscal 2023 Adjusted EBITDA outlook
See the description of the Non-GAAP financial measures mentioned in this press release and reconciliations of the Non-GAAP adjusted measures to the most comparable GAAP measures in the tables that accompany this press release.
“Our second quarter results were consistent with our expectations as our momentum continued led by sustained strong demand across our advantaged portfolio of power brands,” said Howard Friedman, Chief Executive Officer of Utz. “Looking ahead to the remainder of the year, we are raising our full-year Adjusted EBITDA outlook as we execute against our key growth and operational strategies”.
Second Quarter 2023 Financial Highlights
| | | | | | | | | | | | | | | | | | | | |
| | 13-Weeks Ended |
(in $millions, except per share amounts) | | July 2, 2023 | | July 3, 2022 | | % Change |
| | | | | | |
Net Sales | | $ | 362.9 | | | $ | 350.1 | | | 3.6 | % |
Organic Net Sales | | 365.2 | | | 350.1 | | | 4.3 | % |
| | | | | | |
Gross Profit | | 117.4 | | | 111.5 | | | 5.3 | % |
Gross Profit Margin | | 32.4 | % | | 31.9 | % | | 50 | bps |
Adjusted Gross Profit | | 126.9 | | | 126.0 | | | 0.7 | % |
Adjusted Gross Profit Margin | | 35.0 | % | | 36.0 | % | | (102) | bps |
| | | | | | |
Net (Loss) Income | | (8.6) | | | 2.5 | | | nm |
Net (Loss) Income Margin | | (2.4) | % | | 0.7 | % | | nm |
Adjusted Net Income | | 18.8 | | | 18.4 | | | 2.2 | % |
Adjusted EBITDA | | 45.2 | | | 42.2 | | | 7.1 | % |
Adjusted EBITDA Margin | | 12.5 | % | | 12.1 | % | | 40 | bps |
Basic (Loss) Earnings Per Share | | $ | (0.05) | | | $ | 0.04 | | | nm |
Adjusted Earnings Per Share | | $ | 0.13 | | | $ | 0.13 | | | — | % |
Note: See description of Non-GAAP financial measures and reconciliations of GAAP measures to Non-GAAP adjusted measures in the tables that accompany this release.
Second Quarter 2023 Results
Net sales in the quarter increased 3.6% to $362.9 million compared to $350.1 million in the second quarter of 2022. The increase in net sales was driven by Organic Net Sales growth of 4.3%, partially offset by the Company’s continued shift to independent operators (“IOs”) and the resulting increase in sales discounts that impacted net sales growth by (0.7%).
Organic Net Sales growth was driven by the flow through of pricing actions that were taken in fiscal 2022 in response to inflationary pressures which account for a 6.0% increase in net sales, partially offset by volume/mix declines of (1.7%). The volume decline was primarily due to the Company’s ongoing SKU rationalization program focused on reducing lower margin private label and certain partner brands. The Company estimates this program impacted volumes in the second quarter of 2023 by approximately (3.5%). Excluding the impact from SKU rationalization, the Company estimates that volume/mix would have increased 1.8% in the second quarter of 2023 versus the prior year period.
For the 13-week period ended July 2, 2023, the Company’s retail sales, as measured by Circana (formerly IRI) MULO-C, increased 8.8% versus the prior-year period and the Company’s Power Brands’ retail sales increased 9.9% versus the prior-year period(1). Power Brands’ retail sales growth versus the prior-year period was led by Utz®, On The Border®, Zapp’s®, Hawaiian®, and Boulder Canyon®. The Company’s Foundation Brands’ retail sales increased 1.5%(2) versus the prior year period.
(1) Circana (formerly IRI) Total US MULO-C, custom Utz Brands hierarchy, on a pro forma basis.
(2) Circana does not include certain Partner Brands and Private Label sales that are not assigned to Utz Brands.
Gross profit margin was 32.4% compared to 31.9% in the prior year period. Adjusted Gross Margin was 35.0% compared to 36.0% in the prior year period. The benefits from net price realization, productivity, and favorable sales mix more than offset cost inflation. However, Adjusted Gross Margin was impacted by transitory higher inbound freight costs and volume deleverage resulting from our network optimization program, both of which are expected to abate in the second half of 2023. Additionally, the Company estimates that the continued shift to IOs negatively impacted Adjusted Gross Margins by approximately 70 basis points, but with offsetting benefits in Selling, Distribution, and Administrative (“SD&A”) expense.
SD&A expenses increased 6.4% compared to the prior-year period. Adjusted SD&A Expense decreased (2.6)% compared to the prior year period from lower outbound freight costs resulting primarily from the Company's productivity initiatives, but also due in part to improved freight industry conditions. These factors were partially offset by continued investments in brand marketing, selling infrastructure and people, systems, and supply chain capabilities to support growth.
The Company reported a net loss of $(8.6) million compared to income of $2.5 million in the prior-year period. The decrease in net income was primarily attributable to an asset impairment charge of $7.6 million and severance expenses of $1.3 million related to the previously announced closure of the Company’s manufacturing operation at its Birmingham facility, and recording a liability of $4.7 million for the termination of a supply contract with a co-manufacturer. In addition, interest expense increased $4.3 million versus the prior year period.
Adjusted Net Income in the quarter increased 2.2% to $18.8 million compared to $18.4 million in the second quarter of 2022 and Adjusted Earnings per Share of $0.13 was consistent with the prior year period. Adjusted EBITDA increased 7.1% to $45.2 million, or 12.5% as a percentage of net sales, compared to Adjusted EBITDA of $42.2 million, or 12.1% as a percentage of net sales, in the prior year period.
Balance Sheet and Cash Flow Highlights
•As of July 2, 2023
◦Total liquidity of approximately $170 million, consisting of cash on hand of $73.7 million and $96.6 million available under the Company’s revolving credit facility.
◦Net debt of $913.3 million resulting in a Net Leverage Ratio of 5.1x based on trailing twelve months Normalized Adjusted EBITDA of $177.4 million.
•For the 26-weeks ended July 2, 2023
◦Cash flow used in operations was $4.3 million, which reflects the seasonal use of working capital.
◦Capital expenditures were $30.2 million, and dividend and distributions paid were $16.0 million.
Fiscal Year 2023 Outlook
The Company is reaffirming its Net Sales outlook and raising its Adjusted EBITDA outlook for fiscal 2023:
•Total net sales growth of 3% to 5% and Organic Net Sales growth of 4% to 6%, with the Company’s continued shift to IOs impacting total net sales growth by approximately (1.0%). Net sales growth is expected to be driven by net price realization, increased marketing and innovation, and continued distribution gains of the Company’s Power Brands, partially offset by the estimated impact of approximately (3%) from the Company’s SKU rationalization program. Based on these assumptions, the Company expects volume / mix consistent with fiscal 2022.
•Adjusted EBITDA growth of 8% to 11% (previously 7% to 10% growth) as gross margin expansion and lower delivery costs are expected to more than offset cost inflation, and continued investments in brand marketing, people, capabilities, and selling infrastructure.
The Company continues to expect:
•An effective tax rate (normalized GAAP basis tax expense, which excludes one-time items) in the range of 20% to 22%;
•Interest expense of approximately $55 million;
•Capital expenditures in the range of $50 to $55 million; and
•Net Leverage Ratio below 4.5x at year-end fiscal 2023.
With respect to projected fiscal 2023 Adjusted EBITDA, a quantitative reconciliation is not available without unreasonable efforts due to the high variability, complexity, and low visibility with respect to certain items which are excluded from Adjusted EBITDA. We expect the variability of these items to have a potentially unpredictable, and potentially significant, impact on our future financial results.
Conference Call and Webcast Presentation
The Company will host a conference call to discuss these results today at 8:30 a.m. Eastern Time. Please visit the “Events & Presentations” section of Utz’s Investor Relations website at https://investors.utzsnacks.com to access the live listen-only webcast and presentation. Participants can also dial in over the phone by calling 1 (888) 510-2008. The Event Plus passcode is 1774171. The Company has also posted presentation slides and additional supplemental financial information, which are available now on Utz’s Investor Relations website.
A replay will be archived online and is also available telephonically approximately two hours after the call concludes through Thursday, August 17, 2023, by dialing 1-800-770-2030, and entering the Event Plus passcode 1774171.
About Utz Brands, Inc.
Utz Brands, Inc. (NYSE: UTZ) manufactures a diverse portfolio of savory snacks through popular brands including Utz®, On The Border® Chips & Dips, Golden Flake®, Zapp’s®, Good Health®, Boulder Canyon®, Hawaiian Brand®, and TORTIYAHS!®, among others.
After a century with strong family heritage, Utz continues to have a passion for exciting and delighting consumers with delicious snack foods made from top-quality ingredients. Utz’s products are distributed nationally through grocery, mass merchandisers, club, convenience, drug, and other channels. Based in Hanover, Pennsylvania, Utz has multiple manufacturing facilities located across the U.S. to serve our growing customer base. For more information, please visit www.utzsnacks.com or call 1‐800‐FOR‐SNAX.
Investors and others should note that Utz announces material financial information to its investors using its investor relations website (https://investors.utzsnacks.com/investors/default.aspx), U.S. Securities and Exchange Commission (the “Commission”) filings, press releases, public conference calls, and webcasts. Utz uses these channels, as well as social media, to communicate with our stockholders and the public about the Company, the Company’s products and other Company information. It is possible that the information that Utz posts on social media could be deemed to be material information. Therefore, Utz encourages investors, the media, and others interested in the Company to review the information posted on the social media channels listed on Utz’s investor relations website.
Investor Contact
Kevin Powers
Utz Brands, Inc.
kpowers@utzsnacks.com
Media Contact
Kevin Brick
Utz Brands, Inc.
kbrick@utzsnacks.com
Forward-Looking Statements
This press release includes certain statements made herein that are not historical facts but are “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, as amended. The forward-looking statements generally are accompanied by or include, without limitation, statements such as “will”, “expect”, “intends”, “goal” or other similar words, phrases or expressions. These forward-looking statements include future plans for the Company, the estimated or anticipated future results and benefits of the Company’s future plans and operations, future capital structure, future opportunities for the Company, statements regarding the Company’s projected balance sheet and liabilities, including net leverage, and other statements that are not historical facts. These statements are based on the current expectations of the Company’s management and are not predictions of actual performance. These statements are subject to a number of risks and uncertainties and the Company’s business and actual results may differ materially. Factors that may cause such differences include, but are not limited to: the risk that the Company’s gross profit margins may be adversely impacted by a variety of factors, including variations in raw materials pricing, retail customer requirements and mix, sales velocities and required promotional support; changes in consumers’ loyalty to the Company’s brands due to factors beyond the Company’s control; changes in
demand for the Company’s products affected by changes in consumer preferences and tastes or if the Company is unable to innovate or market its products effectively; costs associated with building brand loyalty and interest in the Company’s products, which may be affected by actions by the Company’s competitors’ that result in the Company’s products not suitably differentiated from the products of their competitors; fluctuations in results of operations of the Company from quarter to quarter because of changes in promotional activities; the possibility that the Company may be adversely affected by other economic, business or competitive factors; the risk that recently completed business combinations and other acquisitions recently completed by the Company (collectively, the “Business Combinations”) disrupt plans and operations; the ability to recognize the anticipated benefits of such Business Combinations, which may be affected by, among other things, competition and the ability of the Company to grow and manage growth profitably and retain its key employees; the outcome of any legal proceedings that may be instituted against the Company following the consummation of such Business Combinations; changes in applicable law or regulations; costs related to the Business Combinations; the ability of the Company to maintain the listing of the Company’s Class A Common Stock on the New York Stock Exchange; the inability of the Company to develop and maintain effective internal controls; and other risks and uncertainties set forth in the section entitled “Risk Factors” and “Forward-Looking Statements” in the Company’s Annual Report on Form 10-K filed with the Commission, for the fiscal year ended January 1, 2023 and other reports filed by the Company with the Commission. In addition, forward-looking statements provide the Company’s expectations, plans or forecasts of future events and views as of the date of this communication. These forward-looking statements should not be relied upon as representing the Company’s assessments as of any date subsequent to the date of this communication. The Company cautions investors not to place undue reliance upon any forward-looking statements, which speak only as of the date made. The Company does not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based, except as otherwise required by law.
Non-GAAP Financial Measures:
Utz uses non-GAAP financial information and believes it is useful to investors as it provides additional information to facilitate comparisons of historical operating results, identify trends in our underlying operating results and provide additional insight and transparency on how we evaluate the business. We use non-GAAP financial measures to budget, make operating and strategic decisions, and evaluate our performance. These non-GAAP financial measures do not represent financial performance in accordance U.S., generally accepted accounted principles (“GAAP”) and may exclude items that are significant in understanding and assessing financial results. Therefore, these measures should not be considered in isolation or as an alternative to net income, cash flows from operations or other measures of profitability, liquidity or performance under GAAP. You should be aware that the presentation of these measures may not be comparable to similarly titled measures used by other companies.
Management believes that non-GAAP financial measures should be considered as supplements to the GAAP reported measures, should not be considered replacements for, or superior to, the GAAP measures and may not be comparable to similarly named measures used by other companies. We believe that these non-GAAP measures of financial results provide useful information to investors regarding certain financial and business trends relating to the financial condition and results of operations of the Company to date and that the presentation of non-GAAP financial measures is useful to investors in the evaluation of our operating performance compared to other companies in the salty snack industry, as similar measures are commonly used by the companies in this industry. These non-GAAP financial measures are subject to inherent limitations as they reflect the exercise of judgments by management about which expense and income are excluded or included in determining these non-GAAP financial measures. The non-GAAP financial measures are not recognized in accordance with GAAP and should not be viewed as an alternative to GAAP measures of performance.
Utz uses the following non-GAAP financial measures in its financial communications, and in the future could use others:
•Organic Net Sales
•Adjusted Gross Profit
•Adjusted Gross Profit as % of Net Sales (Adjusted Gross Profit Margin)
•Adjusted Selling, Distribution, and Administrative Expense
•Adjusted Selling, Distribution, and Administrative Expense as % of Net Sales
•Adjusted Net Income
•Adjusted Earnings Per Share
•EBITDA
•Adjusted EBITDA
•Adjusted EBITDA as % of Net Sales (Adjusted EBITDA Margin)
•Normalized Adjusted EBITDA
•Net Leverage Ratio
Organic Net Sales is defined as net sales excluding the impact of acquisitions and excluding the impact of IO route conversions.
Adjusted Gross Profit represents Gross Profit excluding Depreciation and Amortization expense, a non-cash item. In addition, Adjusted Gross Profit excludes the impact of costs that fall within the categories of non-cash adjustments and non-recurring items such as those related to stock-based compensation, hedging and purchase commitments adjustments, asset impairments, acquisition, and integration costs, business transformation initiatives, and financing-related costs. Adjusted Gross Profit is one of the key performance indicators that our management uses to evaluate operating performance. We also report Adjusted Gross Profit as a percentage of Net Sales as an additional measure for investors to evaluate our Adjusted Gross Profit margins on Net Sales.
Adjusted Selling, Distribution, and Administrative Expense is defined as all Selling, Distribution, and Administrative expense excluding Depreciation and Amortization expense, a non- cash item. In addition, Adjusted Selling, Distribution, and Administrative Expenses exclude the impact of costs that fall within the categories of non-cash adjustments and non-recurring items such as those related to stock-based compensation, hedging and purchase commitments adjustments, asset impairments, acquisition and integration costs, business transformation initiatives, and financing-related costs. We also report Adjusted Selling, Distribution, and Administrative Expense as a percentage of Net Sales as an additional measure for investors to evaluate our Adjusted Selling, Distribution, and Administrative margin on Net Sales.
Adjusted Net Income is defined as Net Income excluding the additional Depreciation and Amortization expense, a non-cash item, related to the Business Combination with Collier Creek Holdings and the acquisitions of Kennedy Endeavors, Kitchen Cooked, Inventure, Golden Flake, Truco Enterprises, R.W. Garcia and Festida. In addition, Adjusted Net Income is also adjusted to exclude deferred financing fees, interest income, and expense relating to IO loans and certain non-cash items, such as those related to stock-based compensation, hedging, and purchase commitments adjustments, asset impairments, acquisition and integration costs, business transformation initiatives, remeasurement of warrant liabilities and financing-related costs. Lastly, Adjusted Net Income normalizes the income tax provision to account for the above-mentioned adjustments.
Adjusted Earnings Per Share is defined as Adjusted Net Income (as defined, herein) divided by the weighted average shares outstanding for each period on a fully diluted basis, assuming the Private Placement Warrants are net settled and the Shares of Class V Common Stock held by Continuing Members is converted to Class A Common Stock.
EBITDA is defined as Net Income before Interest, Income Taxes, and Depreciation and Amortization.
Adjusted EBITDA is defined as EBITDA further adjusted to exclude certain non-cash items, such as stock-based compensation, hedging and purchase commitments adjustments, and asset impairments; acquisition and integration costs; business transformation initiatives; and financing-related costs. Adjusted EBITDA is one of the key performance indicators we use in evaluating our operating performance and in making financial, operating, and planning decisions. We believe Adjusted EBITDA is useful to the users of this release and financial information contained in the release in the evaluation of Utz’s operating performance compared to other companies in the salty snack industry, as similar measures are commonly used by companies in this industry. We have historically reported an Adjusted EBITDA metric to investors and banks for covenant compliance. We also provide in this release, Adjusted EBITDA as a percentage of Net Sales, as an additional measure for readers to evaluate our Adjusted EBITDA margins on Net Sales.
Normalized Adjusted EBITDA is defined as Adjusted EBITDA after giving effect to pre-acquisition Adjusted EBITDA of the Festida Foods and R.W. Garcia acquisitions, and the buyout of Clem and J&D Snacks.
Net Leverage Ratio is defined as Normalized Adjusted EBITDA divided by Net Debt. Net Debt is defined as Gross Debt less Cash and Cash Equivalents.
Management believes that the non-GAAP financial measures are meaningful to investors because they increase transparency and assist investors to understand and analyze our ongoing operational performance. The financial measures are shown as supplemental disclosures in this release because they are widely used by the investment community for analysis and comparative evaluation. They also provide additional metrics to evaluate the Company’s operations and, when considered with both the GAAP results and the reconciliation to the most comparable GAAP measures, provide a more complete understanding of the Company’s business than could be obtained absent this disclosure. The non-GAAP measures are not and should not be considered an alternative to the most comparable GAAP measures or any other figure calculated in accordance with GAAP, or as an indicator of operating performance. The Company’s calculation of the non-GAAP financial measures may differ from methods used by other companies. Management believes that the non-GAAP measures are important to have an understanding of the Company’s overall operating results in the periods presented. The non-GAAP financial measures are not recognized in accordance with GAAP and should not be viewed as an alternative to GAAP measures of performance. As new events or circumstances arise, these definitions could change. When the definitions change, we will provide the updated definitions and present the related non-GAAP historical results on a comparable basis.
Utz Brands, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
For the thirteen weeks ended July 2, 2023 and July 3, 2022
(In thousands, except share information)
(Unaudited)
| | | | | | | | | | | |
(in thousands) | Thirteen weeks ended July 2, 2023 | | Thirteen weeks ended July 3, 2022 |
Net sales | $ | 362,853 | | | $ | 350,147 | |
Cost of goods sold | 245,460 | | | 238,618 | |
Gross profit | 117,393 | | | 111,529 | |
| | | |
Selling, distribution, and administrative expenses | | | |
Selling and distribution | 66,869 | | | 68,796 | |
Administrative | 47,584 | | | 38,816 | |
Total selling, distribution, and administrative expenses | 114,453 | | | 107,612 | |
| | | |
(Loss) gain on sale of assets, net | (279) | | | 1,375 | |
| | | |
Income from operations | 2,661 | | | 5,292 | |
| | | |
Other (expense) income | | | |
Interest expense | (15,019) | | | (10,727) | |
Other income (expense) | 272 | | | (645) | |
Gain on remeasurement of warrant liability | 2,808 | | | 5,760 | |
Other (expense) income, net | (11,939) | | | (5,612) | |
| | | |
Loss before taxes | (9,278) | | | (320) | |
Income tax benefit | (725) | | | (2,865) | |
Net (loss) income | (8,553) | | | 2,545 | |
| | | |
Net loss attributable to noncontrolling interest | 4,429 | | | 634 | |
Net (loss) income attributable to controlling interest | $ | (4,124) | | | $ | 3,179 | |
| | | |
Earnings per Class A Common stock: (in dollars) | | | |
Basic | $ | (0.05) | | | $ | 0.04 | |
Diluted | $ | (0.05) | | | $ | 0.04 | |
Weighted-average shares of Class A Common stock outstanding | | | |
Basic | 81,063,457 | | | 80,171,174 | |
Diluted | 81,063,457 | | | 81,510,936 | |
| | | |
Net (loss) income | $ | (8,553) | | | $ | 2,545 | |
Other comprehensive income: | | | |
Change in fair value of interest rate swap | 9,572 | | | 3,011 | |
Comprehensive income | 1,019 | | | 5,556 | |
Net comprehensive (income) loss attributable to noncontrolling interest | 383 | | | (647) | |
Net comprehensive income attributable to controlling interest | $ | 1,402 | | | $ | 4,909 | |
Utz Brands, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
For the twenty-six weeks ended July 2, 2023 and July 3, 2022
(In thousands, except share information)
(Unaudited)
| | | | | | | | | | | |
(in thousands) | Twenty-six weeks ended July 2, 2023 | | Twenty-six weeks ended July 3, 2022 |
Net sales | $ | 714,286 | | | $ | 690,914 | |
Cost of goods sold | 492,397 | | | 475,578 | |
Gross profit | 221,889 | | | 215,336 | |
| | | |
Selling, distribution, and administrative expenses | | | |
Selling and distribution | 131,915 | | | 156,906 | |
Administrative | 88,624 | | | 77,367 | |
Total selling, distribution, and administrative expenses | 220,539 | | | 234,273 | |
| | | |
Gain on sale of assets, net | (787) | | | 1,742 | |
| | | |
(Loss) income from operations | 563 | | | (17,195) | |
| | | |
Other (expense) income | | | |
Interest expense | (29,397) | | | (19,830) | |
Other income (expense) | 1,887 | | | (125) | |
Gain on remeasurement of warrant liability | 576 | | | 7,704 | |
Other (expense) income, net | (26,934) | | | (12,251) | |
| | | |
Loss before taxes | (26,371) | | | (29,446) | |
Income tax benefit | (3,336) | | | (93) | |
Net loss | (23,035) | | | (29,353) | |
| | | |
Net loss attributable to noncontrolling interest | 9,784 | | | 14,962 | |
Net loss attributable to controlling interest | $ | (13,251) | | | $ | (14,391) | |
| | | |
Loss per Class A Common stock: (in dollars) | | | |
Basic | $ | (0.16) | | | $ | (0.18) | |
Diluted | $ | (0.16) | | | $ | (0.18) | |
Weighted-average shares of Class A Common stock outstanding | | | |
Basic | 81,020,732 | | | 79,371,789 | |
Diluted | 81,020,732 | | | 79,371,789 | |
| | | |
Net loss | $ | (23,035) | | | $ | (29,353) | |
Other comprehensive income: | | | |
Change in fair value of interest rate swap | (753) | | | 30,820 | |
Comprehensive (loss) income | (23,788) | | | 1,467 | |
Net comprehensive loss attributable to noncontrolling interest | 10,105 | | | 1,715 | |
Net comprehensive (loss) income attributable to controlling interest | $ | (13,683) | | | $ | 3,182 | |
Utz Brands, Inc.
CONSOLIDATED BALANCE SHEETS
July 2, 2023 and January 1, 2023
(In thousands)
| | | | | | | | | | | |
| As of July 2, 2023 | | As of January 1, 2023 |
| (Unaudited) | | |
ASSETS | | | |
Current Assets | | | |
Cash and cash equivalents | $ | 73,657 | | | $ | 72,930 | |
Accounts receivable, less allowance of $2,669 and $1,815, respectively | 140,977 | | | 136,985 | |
Inventories | 122,386 | | | 118,006 | |
Prepaid expenses and other assets | 40,090 | | | 34,991 | |
Current portion of notes receivable | 5,745 | | | 9,274 | |
Total current assets | 382,855 | | | 372,186 | |
Non-current Assets | | | |
Property, plant and equipment, net | 345,664 | | | 345,198 | |
Goodwill | 915,295 | | | 915,295 | |
Intangible assets, net | 1,081,231 | | | 1,099,565 | |
Non-current portion of notes receivable | 13,975 | | | 12,794 | |
Other assets | 102,064 | | | 95,328 | |
Total non-current assets | 2,458,229 | | | 2,468,180 | |
Total assets | $ | 2,841,084 | | | $ | 2,840,366 | |
LIABILITIES AND EQUITY | | | |
Current Liabilities | | | |
Current portion of term debt | $ | 19,290 | | | $ | 18,472 | |
Current portion of other notes payable | 8,584 | | | 12,589 | |
Accounts payable | 119,597 | | | 114,360 | |
Accrued expenses and other | 63,423 | | | 92,012 | |
Total current liabilities | 210,894 | | | 237,433 | |
Non-current portion of term debt and revolving credit facility | 947,700 | | | 893,335 | |
Non-current portion of other notes payable | 21,173 | | | 20,339 | |
Non-current accrued expenses and other | 73,407 | | | 67,269 | |
Non-current warrant liability | 44,928 | | | 45,504 | |
Deferred tax liability | 122,798 | | | 124,802 | |
Total non-current liabilities | 1,210,006 | | | 1,151,249 | |
Total liabilities | 1,420,900 | | | 1,388,682 | |
Commitments and Contingencies | | | |
Equity | | | |
Shares of Class A Common Stock, $0.0001 par value; 1,000,000,000 shares authorized; 81,141,417 and 80,882,334 shares issued and outstanding as of July 2, 2023 and January 1, 2023, respectively | 8 | | | 8 | |
Shares of Class V Common Stock, $0.0001 par value; 61,249,000 shares authorized; 59,349,000 shares issued and outstanding as of July 2, 2023 and January 1, 2023 | 6 | | | 6 | |
Additional paid-in capital | 935,269 | | | 926,919 | |
Accumulated deficit | (277,111) | | | (254,564) | |
Accumulated other comprehensive income | 30,345 | | | 30,777 | |
Total stockholders' equity | 688,517 | | | 703,146 | |
Noncontrolling interest | 731,667 | | | 748,538 | |
Total equity | 1,420,184 | | | 1,451,684 | |
Total liabilities and equity | $ | 2,841,084 | | | $ | 2,840,366 | |
Utz Brands, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the twenty-six weeks ended July 2, 2023 and July 3, 2022
(In thousands)
(Unaudited)
| | | | | | | | | | | |
| Twenty-six weeks ended July 2, 2023 | | Twenty-six weeks ended July 3, 2022 |
Cash flows from operating activities | | | |
Net loss | $ | (23,035) | | | $ | (29,353) | |
Adjustments to reconcile net loss to net cash used in operating activities: | | | |
Impairment and other charges | 9,548 | | | 3,319 | |
Depreciation and amortization | 40,405 | | | 44,564 | |
Gain on remeasurement of warrant liability | (576) | | | (7,704) | |
Loss (gain) on sale of assets | 787 | | | (1,742) | |
Share-based compensation | 8,939 | | | 5,779 | |
Deferred taxes | (2,003) | | | (977) | |
Deferred financing costs | 451 | | | 703 | |
Changes in assets and liabilities: | | | |
Accounts receivable, net | (3,992) | | | (20,673) | |
Inventories | (4,379) | | | (20,029) | |
Prepaid expenses and other assets | (11,687) | | | (5,415) | |
Accounts payable and accrued expenses and other | (18,773) | | | 5,260 | |
Net cash used in operating activities | (4,315) | | | (26,268) | |
Cash flows from investing activities | | | |
Acquisitions, net of cash acquired | — | | | (75) | |
Purchases of property and equipment | (30,158) | | | (60,278) | |
| | | |
Proceeds from sale of property and equipment | 959 | | | 2,551 | |
Proceeds from sale of routes | 12,446 | | | 12,383 | |
Proceeds from the sale of IO notes | 2,161 | | | 5,017 | |
Proceeds from insurance claims for capital investments | — | | | 2,000 | |
Notes receivable, net | (16,191) | | | (8,849) | |
Net cash used in investing activities | (30,783) | | | (47,251) | |
Cash flows from financing activities | | | |
Line of credit borrowings, net | 61,000 | | | 29,824 | |
Borrowings on term debt and notes payable | 3,246 | | | 28,873 | |
Repayments on term debt and notes payable | (11,785) | | | (13,618) | |
Payment of debt issuance cost | — | | | (265) | |
Payments of tax withholding requirements for employee stock awards | (589) | | | (6,217) | |
| | | |
Proceeds from issuance of shares | — | | | 28,000 | |
Dividends | (9,281) | | | (8,433) | |
Distribution to noncontrolling interest | (6,766) | | | (6,410) | |
Net cash provided by financing activities | 35,825 | | | 51,754 | |
Net increase (decrease) in cash and cash equivalents | 727 | | | (21,765) | |
Cash and cash equivalents at beginning of period | 72,930 | | | 41,898 | |
Cash and cash equivalents at end of period | $ | 73,657 | | | $ | 20,133 | |
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Net Sales and Organic Net Sales
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 13-Weeks Ended | | | | 26-Weeks Ended | | |
(dollars in millions) | | July 2, 2023 | | July 3, 2022 | | Change | | July 2, 2023 | | July 3, 2022 | | Change |
Net Sales as Reported | | $ | 362.9 | | | $ | 350.1 | | | 3.6 | % | | $ | 714.3 | | | $ | 690.9 | | | 3.4 | % |
Impact of Acquisitions | | — | | | — | | | | | — | | | — | | | |
Impact of IO Conversions | | 2.3 | | | — | | | | | 5.3 | | | — | | | |
Organic Net Sales | | $ | 365.2 | | | $ | 350.1 | | | 4.3 | % | | $ | 719.6 | | | $ | 690.9 | | | 4.2 | % |
(1) Organic Net Sales excludes the Impact of Acquisitions and the Impact of IO Conversions that took place after Q2 2022.
Gross Profit and Adjusted Gross Profit
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 13-Weeks Ended | | 26-Weeks Ended |
(dollars in millions) | | July 2, 2023 | | July 3, 2022 | | July 2, 2023 | | July 3, 2022 |
Gross Profit | | $ | 117.4 | | | $ | 111.5 | | | $ | 221.9 | | | $ | 215.3 | |
Depreciation and Amortization | | 9.0 | | | 10.9 | | | 17.6 | | | 21.5 | |
Non-Cash, Non-recurring adjustments | | 0.5 | | | 3.6 | | | 8.4 | | | 4.9 | |
Adjusted Gross Profit | | $ | 126.9 | | | $ | 126.0 | | | $ | 247.9 | | | $ | 241.7 | |
Adjusted Gross Profit as a % of Net Sales | | 35.0 | % | | 36.0 | % | | 34.7 | % | | 35.0 | % |
Adjusted Selling, Distribution, and Administrative Expense
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 13-Weeks Ended | | 26-Weeks Ended |
(dollars in millions) | | July 2, 2023 | | July 3, 2022 | | July 2, 2023 | | July 3, 2022 |
Selling, Distribution, and Administrative Expense - Incl Depreciation and Amortization | | $ | 114.5 | | | $ | 107.6 | | | $ | 220.5 | | | $ | 234.3 | |
Depreciation and Amortization in SD&A Expense | | (11.3) | | (11.5) | | (22.8) | | (23.1) |
Non-Cash, and/or Non-recurring Adjustments | | (21.5) | | (12.3) | | (35.5) | | (48.3) |
Adjusted Selling, Distribution, and Administrative Expense | | $ | 81.7 | | $ | 83.8 | | $ | 162.2 | | $ | 162.9 |
Adjusted SD&A Expense as a % of Net Sales | | 22.5 | % | | 23.9 | % | | 22.7 | % | | 23.6 | % |
Adjusted Net Income
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 13-Weeks Ended | | 26-Weeks Ended |
(dollars in millions, except per share data) | | July 2, 2023 | | July 3, 2022 | | July 2, 2023 | | July 3, 2022 |
Net Income (Loss) | | $ | (8.6) | | | $ | 2.5 | | | $ | (23.0) | | | $ | (29.4) | |
Income Tax (Benefit) Expense | | (0.7) | | | (2.9) | | | (3.3) | | | (0.1) | |
(Loss) Income Before Taxes | | (9.3) | | | (0.4) | | | (26.3) | | | (29.5) | |
Deferred Financing Fees | | 0.5 | | | 0.4 | | | 0.5 | | | 0.7 | |
Acquisition Step-Up Depreciation and Amortization | | 11.7 | | | 13.2 | | | 23.6 | | | 26.4 | |
Certain Non-Cash Adjustments | | 8.5 | | | 4.8 | | | 17.7 | | | 8.3 | |
Acquisition and Integration | | 3.7 | | | 7.2 | | | 7.4 | | | 36.0 | |
Business and Transformation Initiatives | | 10.3 | | | 3.6 | | | 18.5 | | | 7.9 | |
Financing-Related Costs | | — | | | 0.1 | | | 0.1 | | | 0.2 | |
(Gain) on Remeasurement of Warrant Liability | | (2.8) | | | (5.8) | | | (0.6) | | | (7.7) | |
Other Non-Cash and/or Non-Recurring Adjustments | | 31.9 | | | 23.5 | | | 67.2 | | | 71.8 | |
Adjusted Earnings before Taxes | | 22.6 | | | 23.1 | | | 40.9 | | | 42.3 | |
Taxes on Earnings as Reported | | 0.7 | | | 2.9 | | | 3.3 | | | 0.1 | |
Income Tax Adjustments(1) | | (4.5) | | | (7.6) | | | (10.4) | | | (8.7) | |
Adjusted Taxes on Earnings | | (3.8) | | | (4.7) | | | (7.1) | | | (8.6) | |
Adjusted Net Income | | $ | 18.8 | | | $ | 18.4 | | | $ | 33.8 | | | $ | 33.7 | |
| | | | | | | | |
Average Weighted Basic Shares Outstanding | | 140.4 | | | 139.5 | | | 140.4 | | | 138.7 | |
Fully Diluted Shares on an As-Converted Basis | | 143.2 | | | 140.9 | | | 143.0 | | | 140.4 | |
Adjusted Earnings Per Share | | $ | 0.13 | | | $ | 0.13 | | | $ | 0.24 | | | $ | 0.24 | |
(1) Income Tax Rate Adjustment calculated as (Loss) Income before taxes plus (i) Acquisition, Step-Up Depreciation and Amortization and (ii) Other Non-Cash and/or Non-Recurring Adjustments, multiplied by a normalized GAAP effective tax rate, minus the actual tax provision recorded in the Consolidated Statement of Operations and Comprehensive Loss. The normalized GAAP effective tax rate excludes one-time items such as the impact of tax rate changes on deferred taxes and changes in valuation allowances.
Depreciation & Amortization
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 13-Weeks Ended | | 26-Weeks Ended |
(dollars in millions) | | July 2, 2023 | | July 3, 2022 | | July 2, 2023 | | July 3, 2022 |
Core D&A - Non-Acquisition-related included in Gross Profit | | $ | 6.3 | | | $ | 6.8 | | | $ | 12.1 | | | $ | 13.3 | |
Step-Up D&A - Transaction-related included in Gross Profit | | 2.7 | | | 4.1 | | | 5.5 | | | 8.2 | |
Depreciation & Amortization - included in Gross Profit | | 9.0 | | | 10.9 | | | 17.6 | | | 21.5 | |
| | | | | | | | |
Core D&A - Non-Acquisition-related included in SD&A Expense | | 2.3 | | 2.4 | | 4.7 | | 4.9 |
Step-Up D&A - Transaction-related included in SD&A Expense | | 9.0 | | | 9.1 | | | 18.1 | | | 18.2 | |
Depreciation & Amortization - included in SD&A Expense | | 11.3 | | | 11.5 | | | 22.8 | | | 23.1 | |
| | | | | | | | |
Depreciation & Amortization - Total | | $ | 20.3 | | | $ | 22.4 | | | $ | 40.4 | | | $ | 44.6 | |
| | | | | | | | |
Core Depreciation and Amortization | | $ | 8.6 | | | $ | 9.2 | | | $ | 16.8 | | | $ | 18.2 | |
Step-Up Depreciation and Amortization | | 11.7 | | 13.2 | | 23.6 | | 26.4 |
Total Depreciation and Amortization | | $ | 20.3 | | | $ | 22.4 | | | $ | 40.4 | | | $ | 44.6 | |
EBITDA and Adjusted EBITDA
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 13-Weeks Ended | | 26-Weeks Ended |
(dollars in millions) | | July 2, 2023 | | July 3, 2022 | | July 2, 2023 | | July 3, 2022 |
Net Income (Loss) | | $ | (8.6) | | | $ | 2.5 | | | $ | (23.0) | | | $ | (29.4) | |
Plus non-GAAP adjustments: | | | | | | | | |
Income Tax (Benefit) Expense | | (0.7) | | | (2.9) | | | (3.3) | | | (0.1) | |
Depreciation and Amortization | | 20.3 | | | 22.4 | | | 40.4 | | | 44.6 | |
Interest Expense, Net | | 15.0 | | | 10.7 | | | 29.4 | | | 19.8 | |
Interest Income from IO loans(1) | | (0.5) | | | (0.4) | | | (0.9) | | | (0.9) | |
EBITDA | | 25.5 | | | 32.3 | | | 42.6 | | | 34.0 | |
Certain Non-Cash Adjustments(2) | | 8.5 | | | 4.8 | | | 17.7 | | | 8.3 | |
Acquisition and Integration(3) | | 3.7 | | | 7.2 | | | 7.4 | | | 36.0 | |
Business Transformation Initiatives(4) | | 10.3 | | | 3.6 | | | 18.5 | | | 7.9 | |
Financing-Related Costs(5) | | — | | | 0.1 | | | 0.1 | | | 0.2 | |
(Gain) loss on Remeasurement of Warrant Liabilities(6) | | (2.8) | | | (5.8) | | | (0.6) | | | (7.7) | |
Adjusted EBITDA | | $ | 45.2 | | | $ | 42.2 | | | $ | 85.7 | | | $ | 78.7 | |
| | | | | | | | |
Net income (loss) as a % of Net Sales | | (2.4) | % | | 0.7 | % | | (3.2) | % | | (4.3) | % |
Adjusted EBITDA as a % of Net Sales | | 12.5 | % | | 12.1 | % | | 12.0 | % | | 11.4 | % |
(1)Interest Income from IO loans refers to Interest Income that we earn from IO notes receivable that have resulted from our initiatives to transition from RSP distribution to IO distribution ("Business Transformation Initiatives"). There is a notes payable recorded that mirrors most of the IO notes receivable, and the interest expense associated with the notes payable is part of the Interest Expense, Net adjustment.
(2)Certain Non-Cash Adjustments are comprised primarily of the following:
Incentive programs – The Company incurred $3.4 million and $3.3 million of share-based compensation expense, that was awarded to associates and directors, and compensation expense associated with the employee stock purchase plan for the thirteen weeks ended July 2, 2023 and July 3, 2022, respectively. The Company incurred $8.1 million and $4.8 million of share-based compensation, that was awarded to associates and directors, and compensation expense associated with the employee stock purchase plan for the twenty-six weeks ended July 2, 2023 and July 3, 2022, respectively.
Asset Impairments and Write-Offs — For the thirteen weeks ended July 2, 2023, the Company recorded an adjustment for an impairment of $7.6 million related to fixed assets. During the twenty-six weeks ended July 2, 2023, the Company recorded impairments totaling $9.6 million. During the twenty-six weeks ended July 3, 2022, the Company recorded an impairment of $2.0 million related to the termination of a distribution agreements.
Purchase Commitments and Other Adjustments – We have purchase commitments 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 commitment related unrealized gains and losses. The adjustment related to Purchase Commitment and Other non-cash adjustment (gains) losses were $(2.5) million and $1.5 million for the thirteen weeks ended July 2, 2023 and July 3, 2022, respectively. The twenty-six weeks ended July 2, 2023 and July 3, 2022 also included $0.0 million and $1.5 million of unrealized purchase commitment gains, respectively.
(3)Adjustment for Acquisition and Integration Costs – This is comprised of consulting, transaction services, and legal fees incurred for acquisitions and certain potential acquisitions, in addition to expenses associated with integrating recent acquisitions. Such expenses were $3.4 million and $8.3 million for the thirteen and twenty-six weeks ended July 2, 2023, respectively, as well as $0.3 million of expense and $0.9 million of income for the change of the Tax Receivable Agreement Liability associated with the Business Combination for the thirteen and twenty-six weeks ended July 2, 2023, respectively. Charges related to the buyout of multiple distributors, which was accounted for as a contract termination resulted in expense of $23.0 million for the twenty-six week period ended July 3, 2022. Additionally, other acquisitions and integration cost of $6.2 million and $12.0 million were recorded for the thirteen and twenty-six weeks ended July 3, 2022, respectively, also included are adjustment of $1.0 million and $1.0 million of expense for the increase of the Tax Receivable Agreement Liability associated with the Business Combination for the thirteen and twenty-six week period ended July 3, 2022, respectively.
(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 transition costs, fall into this category. The Company incurred such costs of $5.6 million and $3.6 million for the thirteen weeks ended July 2, 2023 and July 3, 2022, respectively, and $13.8 million and $7.9 million for the twenty-six weeks ended July 2, 2023 and July 3, 2022, 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 facilities that was damaged by a natural disaster in 2021.
(5)Financing-Related Costs – These costs include adjustments for various items related to raising debt and equity capital or debt extinguishment costs.
(6)Gains and losses related to the changes in the remeasurement of warrant liabilities are not expected to be settled in cash, and when exercised would result in a cash inflow to the Company with the Warrants converting to Class A Common Stock with the liability being extinguished and the fair value of the Warrants at the time of exercise being recorded as an increase to equity.
Normalized Adjusted EBITDA
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | FY 2022 | | | | | FY 2023 | | |
(dollars in millions) | | Q1 | | Q2 | | Q3 | | Q4 | | FY 2022 | | | Q1 | | Q2 | | TTM |
Adjusted EBITDA | | $ | 36.5 | | | $ | 42.2 | | | $ | 47.7 | | | $ | 44.1 | | | $ | 170.5 | | | | $ | 40.4 | | | $ | 45.2 | | | $ | 177.4 | |
Pre-Acquisition Adjusted EBITDA(1) | | 0.2 | | | — | | | — | | | — | | | 0.2 | | | | — | | | — | | | — | |
Normalized Adjusted EBITDA | | $ | 36.7 | | | $ | 42.2 | | | $ | 47.7 | | | $ | 44.1 | | | $ | 170.7 | | | | $ | 40.4 | | | $ | 45.2 | | | $ | 177.4 | |
(1) Pre-Acquisition Adjusted EBITDA - This adjustment represents the Adjusted EBITDA of acquired companies, prior to the acquisition date, as well as from the buyout date of Clem and J&D Snacks.
Net Debt and Leverage Ratio
| | | | | | | | |
(dollars in millions) | | As of July 2, 2023 |
Term Loan | | $ | 775.3 | |
Real Estate Loan | | 86.4 | |
ABL Facility | | 61.0 | |
Capital Leases(1) | | 64.1 | |
Deferred Purchase Price | | 0.2 | |
Gross Debt(2) | | 987.0 |
Cash and Cash Equivalents | | 73.7 | |
Total Net Debt | | $ | 913.3 | |
| | |
Last 52-Weeks Normalized Adjusted EBITDA | | $ | 177.4 | |
| | |
Net Leverage Ratio(3) | | 5.1x |
(1) Capital Leases include equipment term loans and excludes the impact of step-up accounting.
(2) Excludes amounts related to guarantees on IO loans which are collateralized by routes. We have the ability to recover substantially all of the outstanding loan value in the event of a default scenario, which historically has been uncommon.
(3) Based on Normalized Adjusted EBITDA of $177.4 million.
Utz Brands, Inc. S E C O N D Q U A R T E R 2 0 2 3 E A R N I N G S P R E S E N T A T I O N A U G U S T 1 0 , 2 0 2 3
UTZ BRANDS, INC. Q2 2023 Earnings Presentation 2 Disclaimer Forward-Looking Statements Certain statements made herein are not historical facts but are “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, as amended. The forward-looking statements generally are accompanied by or include, without limitation, statements such as “will”, “expect”, “intends”, “goal” or other similar words, phrases or expressions. These forward-looking statements include the expected effects from the COVID-19 pandemic, future plans for the Utz Brands, Inc. (“the Company”), the estimated or anticipated future results and benefits of the Company’s future plans and operations, future capital structure, future opportunities for the Company, the effects of inflation or supply chain disruptions, statements regarding the Company’s project balance sheet and liabilities, including net leverage, and other statements that are not historical facts. These statements are based on the current expectations of the Company’s management and are not predictions of actual performance. These statements are subject to a number of risks and uncertainties and the Company’s business and actual results may differ materially. Factors that may cause such differences include, but are not limited to: the risk that the Company’s gross profit margins may be adversely impacted by a variety of factors, including variations in raw materials pricing, retail customer requirements and mix, sales velocities and required promotional support; changes in consumers’ loyalty to the Company’s brands due to factors beyond the Company’s control; changes in demand for the Company’s p roducts affected by changes in consumer preferences and tastes or if the Company is unable to innovate or market its products effectively; costs associated with building brand loyalty and interest in the Company’s products, which may be affected by actions by the Company’s competitors’ that result in the Company’s products not suitably differentiated from the products of their competitors; fluctuations in results of operations of the Company from quarter to quarter because of changes in promotional activities; the possibility that the Company may be adversely affected by other economic, business or competitive factors; the risk that the Company may not recognize the anticipated benefits of recently completed business combinations and other acquisitions recently completed by the Company (collectively, the “Business Combinations”), which may be affected by, among other things, competition and the ability of the Company to grow and manage growth profitably and retain its key employees; the ability of the Company to close planned acquisitions; changes in applicable law or regulations; costs related to the Business Combinations and other planned acquisitions; the inability of the Company to maintain the listing of the Company’s Class A Common Stock on the New York Stock Exchange; the inability of the Company to develop and maintain effective internal controls; and other risks and uncertainties set forth in the section entitled “Risk Factors” and “Forward -Looking Statements” in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “Commission”) for the fiscal year ended January 1, 2023, and other reports filed by the Company with the Commission. In addit ion, forward-looking statements provide the Company’s expectations, plans or forecasts of future events and views as of the date of this communication. These forward-looking statements should not be relied upon as representing the Company’s assessments as of any date subsequent to the date of this communication. The Company cautions investors not to place undue reliance upon any forward-looking statements, which speak only as of the date made. The Company does not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based, except as otherwise required by law. Industry Information Unless otherwise indicated, information contained in this presentation or made orally during this presentation concerning the Company’s industry, competitive position and the markets in which it operates is based on information from independent and research organizations, other third-party sources and management estimates. Management estimates are derived from publicly available information released by independent industry analysts and other third-party sources, as well as data from the Company’s internal research, and are based on assumptions made by the Company upon reviewing such data, and the Company’s experience in, and knowledge of, such industry and markets, which the Company believes to be reasonable. In addition, projections, assumptions and estimates of the future performance of the industry in which the Company operates and the Company’s future performance are necessarily subject to uncertainty and risk due to a variety of factors, which could cause results to differ materially from those expressed in the estimates made by the independent parties and by the Company. Non-GAAP Financial Measures This presentation includes certain financial measures not presented in accordance with U.S. generally accepted accounting principles (“GAAP”) including, but not limited to, Organic Net Sales, Adjusted Gross Profit, Adjusted SD&A, EBITDA, Adjusted EBITDA, Normalized Adjusted EBITDA, Adjusted Net Income, and Adjusted Earnings Per Share, and certain ratios and other metrics derived therefrom. These non-GAAP financial measures do not represent financial performance in accordance with 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. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are set forth in the appendix to this presentation. We believe (i) these non- GAAP measures of financial results provide useful information to management and investors regarding certain financial and business trends relating to the financial condition and results of operations of the Company to date; and (ii) that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends in comparing financial measures with other similar companies, many of which present similar non-GAAP financial measures to investors. 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.
Business Overview H O W A R D F R I E D M A N C H I E F E X E C U T I V E O F F I C E R UTZ BRANDS, INC. Q2 2023 Earnings Presentation
UTZ BRANDS, INC. Q2 2023 Earnings Presentation 4 Second Quarter Key Takeaways Organic Net Sales growth of 4.3% on top of 13.6% growth in the prior year period Power Brands’ retail sales growth of 10%(1) led by Boulder Canyon®, Zapp’s®, and On the Border® Adjusted EBITDA margins expanded for the second consecutive quarter (1) Retail sales are Circana Total US MULO-C, custom Utz Brands hierarchy, 13-weeks ended 7/2/2023; % YoY Growth compared to the comparable period in the prior year on a pro forma basis. Early-stage network optimization and other productivity projects are underway Raising fiscal 2023 Adjusted EBITDA growth outlook
Summary of Second Quarter 2023 Results ▪ Results in line with our expectations ▪ Organic net sales growth of +4.3% led by strong Power Brands sales growth ▪ Volume/mix growth of +1.8% when adjusting for SKU rationalization impact of approximately (3.5%) ▪ Productivity benefits and lower delivery costs fueled Adj. EBITDA margin expansion of +40bps 35.8 % 36.5 % Adj. Gross ProfitNet Sales (in Millions) (in Millions) Adj. EBITDA (in Millions) Note: Organic Net Sales, Adjusted Gross Profit, Adjusted Gross Margin, Adjusted EBITDA Margin and Adjusted EBITDA, are Non-GAAP financial measures. See appendix for reconciliation of Non-GAAP financial measures to most directly comparable GAAP measures. UTZ BRANDS, INC. Q2 2023 Earnings Presentation 5 $42.2 $45.2 2Q’22 2Q’23 +7% $350.1 $362.9 2Q’22 2Q’23 +4% $126.0 $126.9 2Q’22 2Q’23 +1% 36.0% 35.0% 12.5%12.1% Adj. Gross Margin Adj. EBITDA Margin
UTZ BRANDS, INC. Q2 2023 Earnings Presentation 6 Second Quarter Retail Sales Overview UTZ POWER BRANDS RETAIL SALES GROWTH 9.9% IN 2Q’23 Retail Sales Year-over-Year Growth (13-Weeks Ended 7/2/23) Source: Retail sales are Circana Total US MULO-C, custom Utz Brands hierarchy, 13-weeks ended 7/2/2023; % YoY growth compared to the comparable period in the prior year on a pro forma basis. Total Salty Category Total Utz Brands Utz Power Brands 1.5% Utz Foundation Brands 11.9% 9.9% 8.8% 49% 19% 6% 26% % of Total Retail Sales (13-Weeks Ended 7/2/23) +7% YoY Growth +16% YoY Growth All other brands +34% YoY Growth THREE LARGEST POWER BRANDS Double-digit growth IN 2Q’23 ~74% OF TOTAL 2Q’23 RETAIL SALES
UTZ BRANDS, INC. Q2 2023 Earnings Presentation 7 Consumption Volume Trends are Improving Utz & Salty Snack Category Retail Volume Rolling 12-Week Trends vs. YAG 0.4% -0.6% -4.2% -4.8% -0.5% -7.8% -0.5% -8.9% -9.3% -0.5% -2.7% -7.5% -0.6% -1.8% -0.8% Total Salty Snacks Power Brands 12-weeks ended 3/26/23 4/23/23 5/21/23 6/18/23 7/16/23 ▪ Lapping significant growth in 1H’23 due to strong activity in the Mass channel in the prior year ▪ New distribution gains in 2Q’23 primarily in the Mass and Grocery channels ▪ Sustained and resilient Salty Snack category customer demand Source: Retail sale are Circana Total US MULO-C, custom Utz Brands hierarchy; % YoY growth compared to the comparable period in the prior year on a pro forma basis.
▪ Double-digit growth across Potato Chips, Tortilla Chips, and Pretzels ▪ Pork Rind performance improving as we invest in price pack architecture and packaging enhancements ▪ Cheese snacks softness due to lapping incremental programming in the Mass channel last year that did not repeat ▪ Salsa and queso significantly outpacing the category 2Q’23 Retail Sales by Sub-Category Total Sub-Category Sub-Category Retail Sales Year-over-Year Growth (13-Weeks Ended 7/2/23) Source: Retail sale are Circana Total US MULO-C, custom Utz Brands hierarchy, 13-weeks ended 7/2/2023; % YoY growth compared to the comparable period in the prior year on a pro forma basis. UTZ BRANDS, INC. Q2 2023 Earnings Presentation 8 13.5% 15.3% 14.6% 13.8% 12.9% 12.1% 12.7% -3.6% -5.7% 2.3% 2.4% 7.1% 12.4% Potato Chips Tortilla Chips Pretzels Cheese Snacks Salsa Queso -0.9% Pork Rinds
▪ Core share performance impacted by lapping strong Utz growth®, Golden Flake performance, and RW Garcia portfolio optimization – Several brands gaining share including On The Border®, Zapp’s®, Hawaiian®, and Boulder Canyon® ▪ Share gains in Expansion led by Utz®, Zapp’s®, Hawaiian®, and Boulder Canyon® 2Q’23 Retail Sales by Geography Source: Retail sales are IRI Total US MULO-C, custom Utz Brands hierarchy, 13-weeks ended 7/2/2023; % YoY Growth compared to the comparable period in the prior year on a pro forma basis. Geographic Retail Sales Year-over-Year Growth (13-Weeks Ended 7/2/23) Total Salty Snacks Power Brands UTZ BRANDS, INC. Q2 2023 Earnings Presentation 9 11.6%11.5% 12.0% 7.2% 7.8% 13.5% CORE EXPANSION
Source: SPINS, Total US – Natural Enhanced Channel (TPL) UTZ BRANDS, INC. Q2 2023 Earnings Presentation 10 Driving Share Gains in the Natural Channel: 2Q’23 Boulder Canyon® Retail Sales +28% 10.5% 13-Weeks Ending 7/2/23 19.2% 52-Weeks Ending 7/2/23 15.8% 10.1% Total Salty Snacks Natural Channel Retail Sales Year-over-Year Growth (13-Weeks Ended 7/2/23)
UTZ BRANDS, INC. Q2 2023 Earnings Presentation 11 Accelerating Brand Marketing and Capability Investments: Double-Digit Year-over-Year % Increase in Marketing Spend planned for 2H’23 Enhancing critical design impressions with strategic design partners Elevating omnichannel and eCommerce strategy to accelerate growth Expanding our marketing reach and impact via increased investments
UTZ BRANDS, INC. Q2 2023 Earnings Presentation 12 Recent On-Trend Innovation Supporting Growth: Utz Mike’s Hot Honey® (1) IRI Total US MULO+C L52WK ending 6/25/23 ▪ Hot & Spicy is now the #1 flavor in Salty Snacks, and growing nearly twice the rate of the category(1) ▪ Utz Mike’s Hot Honey® potato chips $ sales already ~400% higher than previously best Utz limited time offer ▪ Strong weekly velocities already approaching one of our top selling items – Honey BBQ chips ▪ Retail activation and marketing support driving ~75 million earned media impressions
UTZ BRANDS, INC. Q2 2023 Earnings Presentation 13 Well-Positioned for a Strong Second Half of 2023 Sales volumes building momentum ✓ Brand investments increasing ✓ ✓ Productivity projects on track ✓ Adj. Gross and EBITDA margin expanding ✓ Balance sheet deleveraging
UTZ BRANDS, INC. Q2 2023 Earnings Presentation Financial Performance A J A Y K A T A R I A C H I E F F I N A N C I A L O F F I C E R
UTZ BRANDS, INC. Q2 2023 Earnings Presentation 15 Second Quarter Financial Results Summary Note: Organic Net Sales, Adjusted SD&A, Adjusted Gross Profit, Adjusted EBITDA, Adjusted Net Income and Adjusted EPS are Non-GAAP financial measures. See appendix for reconciliation of Non-GAAP financial measures to most directly comparable GAAP measures. 2Q’23 2Q’22 YoY Change In $ millions, except per share amounts 13-weeks ended July 2, 2023 13-weeks Ended July 3, 2022 Net Sales 362.9 350.1 +3.6% Organic Net Sales 365.2 350.1 +4.3% Adj. Gross Profit 126.9 126.0 +0.7% % of net sales 35.0% 36.0% (102 bps) Adj. SD&A Expense 81.7 83.8 (2.6%) % of net sales 22.5% 23.9% +144 bps Adj. EBITDA 45.2 42.2 +7.1% % of net sales 12.5% 12.1% +40 bps Adj. Net Income 18.8 18.4 2.2% Adj. EPS $0.13 $0.13 ▪ Organic Net Sales growth of 4.3% ▪ Net price realization of +6.0% partially offset by volume / mix of (1.7%), impacted by SKU rationalization ▪ Adjusted Gross Margin decline of 102bps ▪ Margins impacted by transitory higher inbound freight costs and volume deleverage resulting from our network optimization program ▪ Estimate IO conversions adversely impacted Adjusted Gross Margin by approximately 70 bps ▪ Adjusted SD&A Expense leverage of 144bps ▪ Lower outbound freight costs from productivity initiatives and improved freight industry conditions more than offset increased investments, including marketing ▪ Adjusted Net Income +2.2% ▪ Higher Adjusted EBITDA partially offset by higher interest expense
UTZ BRANDS, INC. Q2 2023 Earnings Presentation 16 ▪ Total net sales growth of 3.6% and Organic Net Sales growth of +4.3% ▪ Net price realization benefit as a result of inflation-justified actions in fiscal 2022 ▪ Volume/mix growth of 1.8% excluding the impact from SKU rationalization of (3.5%) ▪ Impact from conversion of company-owned direct store delivery (“DSD”) routes to IOs of (0.7%) 2Q’23 Net Sales Bridge 2Q’23 Net Sales YoY Growth Decomposition (1) SKU rationalization based on Utz estimates. (2) Estimated impact due to conversion of employee-serviced DSD routes to independent operator-serviced routes. IO Conversions -0.7% Price 2Q’23 Organic Net Sales Growth 6.0% 1.8% Volume/Mix ex-SKU Rationalization 3.6% 2Q’23 Total Net Sales Growth 4.3% SKU Rationalization -3.5% (1) Note: Organic Net Sales is a Non-GAAP financial measure. Note: See appendix for reconciliation of Non-GAAP financial measures to most directly comparable GAAP measures. (2)
2Q’23 Adjusted EBITDA Margin Decomposition UTZ BRANDS, INC. Q2 2023 Earnings Presentation 17 ▪ Higher net price realization from 2022 actions to counter inflation ▪ Favorable sales mix primarily due to SKU rationalization ▪ Benefits from productivity initiatives ▪ Increased investments in brand marketing, people, selling infrastructure, and supply chain capabilities to support growth ▪ Lower delivery costs offset by commodity and labor inflation, and transitory higher inbound freight costs and volume deleverage 2Q’23 Adjusted EBITDA Margin Bridge (1) Represents savings realized during Q2 2023 as a % of prior year net sales. (2) Excludes Distribution Expense. Vol/Mix2Q’22 6.0% Price 0.7% 2.7% Productivity -1.0% Selling & Admin Exp -7.8% 2Q’23Inflation 12.1% 12.5% (2) Note: Adjusted EBITDA Margin is a Non-GAAP financial measure. See appendix for reconciliation of Non-GAAP financial measures to most directly comparable GAAP measures. (1)
UTZ BRANDS, INC. 18 Building Momentum Across Margin-Enhancing Initiatives ✓ Managing cost inflation with FY’22 pricing execution and strategic revenue management programs ongoing ✓ Improving margin mix through the continued reduction of private label and partner brands SKU’s Delivering productivity expected to approach 4% in FY’23✓ ✓ Network optimization underway within Utz plant footprint and in-sourcing production from co-manufacturers Q2 2023 Earnings Presentation 1% 2% 3% ~4% 2020 Actual 2021 Actual 2022 Actual 2023E Productivity(1,2,3) (Annual Savings as % of Prior Year COGS) 1) Represents cost savings realized during each 52 or 53-week fiscal year as a percentage of COGS with percentage progress measured as dollar amounts saved over prior 52 or 53-week fiscal year COGS. 2) FY2019 represents the 52-week period ended December 29, 2019, for the Predecessor; FY 2020 represents the 53-week period ended January 3, 2021, consisting of the Predecessor period from December 30, 2019, through August 28, 2020, and the Successor period from August 29, 2020, through January 3, 2021; FY 2021 represents the 52-week period ended January 2, 2022, for the Successor; and FY 2022 represents the 52-week period ended January 1, 2023, for the Successor. 3) FY 2023E represents estimated total annual savings as % of FY 2022 COGS. Adjusted EBITDA Margin YoY Change (as % of Net Sales) 3Q'22 4Q'22 1Q'23 2Q'23 -120bps -10bps +80bps +40bps Note: Adjusted EBITDA Margin is a Non-GAAP financial measure. See appendix for reconciliation of Non-GAAP financial measures to most directly comparable GAAP measures.
UTZ BRANDS, INC. Q2 2023 Earnings Presentation 19 Cash Flow and Balance Sheet Highlights Note: See appendix for reconciliation of Non-GAAP financial measures to most directly comparable GAAP measures. (1) Includes $6.8M of Distributions to Non-controlling Interest. (2) Includes Term Loan, ABL Facility and Capital Leases. Capital Leases include equipment term loans and excludes the impact of step-up accounting. (3) Net Leverage Ratio is a Non-GAAP financial measure and is based on Normalized Adjusted EBITDA of $177.4M. As of January 1, 2023 Cash Flow Highlights 26-Weeks Ended July 2, 2023 Net Cash Used in Operations $4.3M Capital Expenditures $30.2M Dividends and Distributions Paid(1) $16.0M Balance Sheet Highlights As July 2, 2023 Cash and Cash Equivalents $73.7M Gross Debt(2) $987.0M Net Debt $913.3M Net Leverage Ratio(3) 5.1x
UTZ BRANDS, INC. Fiscal 2023 Outlook Note: See appendix for reconciliation of Non-GAAP financial measures to most directly comparable GAAP measures. (1) Normalized GAAP basis tax expense, which excludes one-time items. Fiscal 2023 Growth versus Fiscal 2022 Actual Results Net Sales +3% to 5% Total growth +4% to 6% Organic growth (unchanged) ▪ Organic Net Sales growth led by price and volume/mix consistent with fiscal 2022 ▪ IO route conversion negative impact of ~1% on total net sales growth and expect IO route conversion to be substantially complete in 2H’23 ▪ Growth supported by increased marketing and innovation, and continued distribution gains, partially offset by SKU rationalization impact of ~300bps Adjusted EBITDA +8% to 11% growth (previously +7% to +10%) ▪ Gross input cost inflation of high-single-digits with moderation in 2H’23 ▪ SD&A expense growth driven by investments in brand marketing, people, selling infrastructure, and supply chain capabilities ▪ Adj. EBITDA margin expansion through a combination of gross margin expansion and SD&A expense leverage Additional Assumptions: (all unchanged) ▪ Effective tax rate of between 20% to 22%(1) ▪ Net interest expense of approximately $55M ▪ Capital expenditures of between $50M to $55M ▪ Net leverage below 4.5x at year-end fiscal 2023 Q2 2023 Earnings Presentation 20
Appendix UTZ BRANDS, INC. Q2 2023 Earnings Presentation
UTZ BRANDS, INC. 22 Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures Q2 2023 Earnings Presentation See footnotes in Utz’s 2Q’23 earnings press release dated August 10, 2023.
UTZ BRANDS, INC. 23 Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures Q2 2023 Earnings Presentation See footnotes in Utz’s 2Q’23 earnings press release dated August 10, 2023.
UTZ BRANDS, INC. 24 Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures Q2 2023 Earnings Presentation See footnotes in Utz’s 2Q’23 earnings press release dated August 10, 2023.
UTZ BRANDS, INC. 25 Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures Q2 2023 Earnings Presentation See footnotes in Utz’s 2Q’23 earnings press release dated August 10, 2023.
UTZ BRANDS, INC. 26 Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures Q2 2023 Earnings Presentation See footnotes in Utz’s 2Q’23 earnings press release dated August 10, 2023.
27 Utz Geographic Classifications FL NM DE MD TX OK KS NE SD ND MT WY CO UT ID AZ NV WA CA OR KY ME NY PA VT NH MA RI CT WV INIL NC TN SC ALMS AR LA MO IA MN WI NJ GA DC VA OH MI AK HI Core Expansion UTZ BRANDS, INC. Q2 2023 Earnings Presentation
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