Utz Brands, Inc. current report, 28 August 2020

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Utz Brands, Inc. — Form 8-K Summary

Reporting date: August 28, 2020; the filing was signed September 3, 2020. The filing documents the completion of Utz Brands’ business combination with Collier Creek Holdings and the related domestication, governance, financing, equity, and reporting changes.

Business Context and Transaction

  • Collier Creek domesticated from the Cayman Islands into Delaware, acquired interests in Utz Brands Holdings, LLC, and changed its name to Utz Brands, Inc.
  • The transaction was approved by Collier Creek shareholders on August 27, 2020 and closed on August 28, 2020.
  • Utz Brands’ Class A common stock and warrants began trading on the New York Stock Exchange on August 31, 2020 under the symbols UTZ and UTZ.WS.
  • The transaction exchanged or issued interests representing 59,369,050 Common Company Units and 61,249,000 shares of Class V common stock.

Financial Metrics, Funding, Debt, and Liquidity

  • Collier Creek’s trust account held approximately $452.6 million after the redemption of 5,950 public shares.
  • The transaction also included $35.0 million from forward purchases and approximately $51,820 of Collier Creek cash on hand.
  • At closing, $240.4 million of the contribution amount was applied to repay certain Utz indebtedness and transaction expenses.
  • Collier Creek paid approximately $154.5 million to the UPA Seller and approximately $44.7 million to the Sellers as Net Cash Consideration.
  • The filing does not provide clear revenue, net income, operating margin, adjusted EBITDA, operating cash flow, balance-sheet cash, or total debt values in the supplied text. Historical and interim financial statements and management’s discussion are incorporated by reference or filed as exhibits.
  • Utz’s distribution policy contemplates quarterly ordinary and tax distributions, subject to available funds, applicable law, and bank-financing restrictions.
  • The Company expects to declare aggregate dividends of at least $0.20 per Class A share for the four fiscal quarters following closing, subject to board determination and available funds; the Company is not obligated to make those distributions.

Material Changes Versus the Prior Comparable Period

  • The transaction converted Collier Creek from a shell company into the combined operating company, Utz Brands, Inc.
  • The Company changed its fiscal year-end from December 31 to the Sunday closest to December 31. The 2020 fiscal year-end became January 3, 2021, and the 2021 fiscal year-end is expected to be January 2, 2022.
  • The Company appointed Grant Thornton LLP as its independent registered public accounting firm, replacing WithumSmith+Brown, PC. The filing reports no disagreements or reportable events relating to Withum.
  • The Company adopted a new capital structure consisting of Class A, Class B, and Class V common stock, Common Company Units, warrants, and equity incentive awards.
  • All outstanding Restricted Company Units and corresponding Restricted Sponsor Shares vested at closing because the board determined that the applicable stock-price thresholds had been satisfied.

Governance, Agreements, Outlook, and Risks

  • The Sellers and Sponsor parties received board nomination rights, with five nominees from each group at closing, subject to later step-down provisions.
  • For so long as specified ownership thresholds are maintained, the Sellers have consent rights over certain major transactions, liquidations, material charter changes, relocation of headquarters from Hanover, Pennsylvania, and name changes.
  • Under the Tax Receivable Agreement, the Company generally must pay Sellers or exchanging holders 85% of realized tax savings from specified increases in tax basis and related tax attributes. The Company may also have acceleration obligations if the agreement is terminated or certain events occur.
  • Sellers may generally exchange Common Company Units and an equal number of Class V shares for Class A shares on a one-for-one basis after the one-year anniversary of closing, or earlier if applicable lock-up conditions are met. The Company may elect to pay cash instead.
  • The lock-up period generally ends on August 28, 2021 or earlier if the Class A stock meets specified trading-price conditions.
  • The filing contains forward-looking statements regarding the benefits of the combination, future performance, expansion, and growth, but does not provide a distinct current-period financial forecast in the supplied text.
  • Key risks include integration and execution of the business combination, competition, retention of key personnel, legal proceedings, regulatory changes, NYSE listing compliance, internal-control effectiveness, raw-material costs, promotional requirements, consumer preferences, brand competition, and quarterly volatility.
  • Management compensation changes include a $750,000 initial base salary for CEO Dylan Lissette, a target annual bonus equal to 100% of base salary, a maximum bonus of 200%, and specified equity awards.

Most Important Facts for Investors to Verify

  • Review Exhibits 99.2 through 99.5 for the actual historical, interim, pro forma, and management-reported revenue, profitability, cash flow, debt, liquidity, and margin data.
  • Reconcile the approximately $240.4 million debt repayment and transaction expenses with the post-closing debt and liquidity balances.
  • Assess the future cash burden of the Tax Receivable Agreement, including potential acceleration payments.
  • Evaluate dilution from approximately 23.0 million warrant shares, 9.5 million shares reserved under the equity incentive plan, 1.48 million 2020 LTIP RSU shares, and future exchanges of Class V shares and Common Company Units.
  • Confirm the dividend policy against debt covenants, available cash, tax obligations, and board declarations.
  • Review the Sellers’ governance, consent, registration, exchange, and lock-up rights and their potential effect on control and trading liquidity.
  • Confirm the final pro forma ownership, including the reported approximate voting-power allocation of 36.5% for pre-combination public shareholders, 12.7% for the Sponsor and former non-employee directors, and 50.8% for former Utz equityholders.