Business context and reporting period
This is Collier Creek Holdings’ unaudited Form 10-Q for the quarter and six months ended June 30, 2020, filed August 10, 2020—not an operating-company quarterly report for Utz Brands, Inc. Collier Creek was a blank-check company pursuing a business combination and reported no operating revenue. On June 5, 2020, it agreed to combine with Utz Brands Holdings, LLC and related sellers; the transaction was expected to close in the third quarter of 2020.
Financial results and position
- Revenue and margins: No operating revenue or operating margin was reported. Collier Creek’s activity was limited to transaction preparation and pursuit of a business combination.
- Net results: Q2 2020 net loss was $383,906, versus net income of $2.36 million in Q2 2019. For the first six months, net loss was $206,112 versus net income of $4.66 million in 2019. Results primarily reflected lower trust-account investment income and higher general and administrative costs.
- Expenses and investment income: Q2 general and administrative expense was $556,336, compared with $125,790 a year earlier; trust-account investment income was $172,430, compared with $2.48 million. For the six months, those figures were $1.79 million and $1.58 million in 2020, versus $285,496 and $4.94 million in 2019, respectively.
- Cash flow: Net cash used in operating activities was $271,691 for the six months, compared with $272,744 in 2019. Cash at June 30 was $313,562, down from $585,253 at year-end 2019.
- Assets, liabilities and liquidity: The balance sheet showed $452.6 million in trust-account marketable securities, mostly restricted for a business combination or shareholder redemptions, and total liabilities of $17.52 million, including $15.45 million of deferred underwriting commissions and legal fees. Management reported a working-capital deficit of approximately $1.7 million and concluded substantial doubt existed about the company’s ability to continue as a going concern if it did not complete a business combination by October 10, 2020.
- Debt: No working-capital loans were outstanding at June 30. The filing does not report conventional funded debt.
Material changes versus the prior comparable period
Collier Creek shifted from net income to net loss in both the quarter and first half. Trust investment income fell substantially year over year, while general and administrative expense increased. The filing attributes the earnings profile to its SPAC status and does not provide Utz operating results, revenue, profit, cash flow, or margins.
Outlook, risks and unusual items
- The proposed Utz combination included an Up-C structure, cash and equity consideration, a planned $35 million forward-purchase investment, and a tax receivable agreement under which the company would pay sellers 85% of certain realized tax savings.
- If no business combination closed by October 10, 2020, the company was required to cease operations and redeem public shares, followed by liquidation. Public warrants could expire worthless in that scenario.
- COVID-19 could disrupt the transaction search or target operations; the specific financial impact was not determinable in the filing. Management also identified the possibility that negative interest rates could reduce trust-account value and shareholder redemption proceeds.
- Deferred underwriting commissions of $15.45 million and deferred legal fees were payable only upon completion of a business combination; the filing also disclosed approximately $7.65 million of deferred legal fees accrued in connection with the transaction.
- Management stated disclosure controls were effective and reported no material change in internal control over financial reporting. No legal proceedings were reported.
Important facts for investors to verify
- Confirm the status and final terms of the proposed Utz transaction, including closing conditions, redemption levels, financing and any changes to the anticipated third-quarter closing.
- Review Utz’s own financial filings for operating performance; this Collier Creek 10-Q does not provide those results.
- Assess unrestricted cash and transaction funding against the reported working-capital deficit, deferred fees and the October 10, 2020 business-combination deadline.
- Verify the effect of shareholder redemptions, forward-purchase commitments, sponsor arrangements and the tax receivable agreement on post-transaction ownership and cash flows.