Business context and reporting period
Important filing-identity discrepancy: The supplied filing is Collier Creek Holdings’ Form 10-K, not a filing by Utz Brands, Inc. It covers the fiscal year ended December 31, 2019; it does not report Utz’s financial results. The filing was signed March 12, 2020.
Collier Creek was a blank-check company seeking a business combination, with a stated focus on consumer goods and related sectors. As of year-end, it had not identified a target and had conducted no operating business. Accordingly, the annual figures below are for the SPAC, not an operating snack-food company; the filing does not provide standalone fourth-quarter results.
Financial metrics and material changes
| Metric | FY 2019 | Prior reported period |
|---|---|---|
| Operating revenue | None; the company reported no operating revenues | None |
| Investment income from trust | $8.97 million | $2.05 million from inception on April 30, 2018 through December 31, 2018 |
| General and administrative expense | $998,232 | $137,154 for the inception-to-year-end 2018 period |
| Net income | $7.97 million | $1.91 million for the inception-to-year-end 2018 period |
| Cash used in operating activities | $359,637 | $389,297 for the inception-to-year-end 2018 period |
| Cash outside trust | $585,253 | $944,890 |
| Trust account | $451.02 million | $442.05 million |
| Working capital | Approximately $119,000 | Not clearly stated as a comparable figure |
| Total liabilities | $16.05 million, including $15.45 million of deferred underwriting commissions and legal fees | $15.60 million |
The reported net income primarily reflects interest earned in the trust account, not operating profit. Margins are not meaningful because there was no operating revenue. No borrowings under the contemplated working-capital loan arrangement were outstanding at year-end. The 2018 comparison covers only the period since inception, so it is not a full-year comparison.
Liquidity, outlook, risks and unusual items
- The company had $451.02 million in trust investments, principally money-market funds, but only $585,253 in cash outside the trust account for operating and search costs.
- Management said the outside-trust funds were expected to support operations through October 10, 2020, but acknowledged its estimate could be wrong. The auditor’s report included an explanatory paragraph expressing substantial doubt about the company’s ability to continue as a going concern, principally given limited liquidity and the mandatory liquidation deadline.
- The company had 24 months from its October 10, 2018 IPO closing—through October 10, 2020—to complete a business combination. If unsuccessful, it was required to cease operations and redeem public shares, subject to creditor claims and applicable law; warrants would expire worthless.
- A $35 million forward purchase commitment from the sponsor and independent directors was intended to close only alongside a business combination and was subject to conditions. The filing cautions that failure to fund could leave the company short of transaction capital.
- Key risks include inability to find or finance a suitable target in time, shareholder redemptions that reduce available cash, competition for targets, conflicts of interest and competing obligations of insiders, possible dilution, and claims against trust assets. Sponsor indemnification for certain trust shortfalls was not backed by a reserve, and the company could not assure the sponsor could meet the obligation.
- No operating-company guidance or revenue outlook was provided. Management’s stated strategy was to seek a business with durable growth, attractive cash flow and opportunities for operational improvement; there was no assurance it would complete a transaction or achieve those objectives.
Most important facts for investors to verify
- Confirm the intended issuer: this document is Collier Creek Holdings’ 2019 10-K, not Utz Brands’ filing.
- Verify whether and when Collier Creek subsequently completed a business combination; this filing reports the company’s status only through its 2019 reporting period.
- Review the trust balance, outside-trust cash, deferred transaction fees, redemption terms and October 10, 2020 deadline in the relevant subsequent filings.
- Assess the going-concern warning, funding dependence and enforceability and collectability of the sponsor’s trust-account indemnity.
- Review potential dilution from founder-share conversion, warrants, forward-purchase securities and any transaction financing, as well as insider conflicts and redemption levels.